Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline

44 Pages Posted: 7 Nov 2020

Date Written: September 15, 2020

Abstract

I examine the case of a firm that practices both second-degree and third-degree price discrimination. I present a model showing conditions under which the premium for higher quality can either rise or fall as the firm implements group pricing. I then use new data from a regional airline to estimate how the two kinds of price discrimination interact, and how each is affected by changes in competition. I establish three key results, all new to the literature. First, in different markets, the two kinds of price discrimination can either offset or reinforce each other, in a manner that fits the model's predictions. Second, inter-temporal differences in prices are purely driven by price discrimination, rather than by scarcity pricing. Third, competition increases the extent of both kinds of price discrimination.

Suggested Citation

Chandra, Ambarish, Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline (September 15, 2020). Available at SSRN: https://ssrn.com/abstract=3694848 or http://dx.doi.org/10.2139/ssrn.3694848

Ambarish Chandra (Contact Author)

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S3E6
Canada

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