Discriminatory Product Differentiation: The Case of Israel's Omission from Airline Route Maps
55 Pages Posted: 11 Feb 2017 Last revised: 10 May 2018
Date Written: May 5, 2018
While product differentiation is generally benign, it can be employed to discriminate against customer groups, either to enhance profitability by appealing to discriminatory customer preferences or in unprofitable ways that indulge owner tastes for discrimination. We investigate such discriminatory product differentiation by international airlines through their depictions of Israel on online route maps and whether their online inflight menus include kosher meal options. We first show that several airlines omit Israel from their online route maps. Three of these airlines are members of major international airline alliances. With data on over 100 airlines, we then document that online route map “denial” of Israel’s existence is more likely for airlines with customers from countries exhibiting greater anti-Semitism. Owner tastes also matter. Denial is more likely for state-owned airlines in countries that do not recognize Israel. Availability of kosher meal options follows similar patterns, suggesting greater interest in not serving Jewish rather than just Israeli customers. Neither online route map treatment nor ownership by states not recognizing Israel affects the likelihood of alliance membership with alliance leaders having few airline alternatives to choose from in the Middle East. The price of achieving greater international business scope in airlines is accommodation of regional allies with discriminatory customer practices many outside the region find repugnant even if subtly presented via product design.
Keywords: customer discrimination, product differentiation, airlines, alliances
JEL Classification: J15, L88, L93, M16, D74
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