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Essay / Research Paper Abstract
This 3-page paper examines two articles that discuss price discrimination in the airline industry. Bibliography lists 2 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTpridisai.rtf
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Unformatted sample text from the term paper:
a few industries in which price discrimination takes place. Price discrimination is the practice of charging different prices for the same good or service. The one industry that comes to
mind that uses this practice regularly is the airline industry. Though airline economics is somewhat convoluted, there are few other markets or industries in which the same seat can have
so many different prices assigned to it. Because of this, the industry has been an endless source of fascination to economics and business writers and researchers.
For example, researchers Gerardi and Shapiro (2007) examined newer theories detailing the relationship between the airline industry market structure and price discrimination. The authors pointed out
that competitive firms cant price discriminate (as theyre price takers), while monopolists can discriminate (Gerardi and Shapiro, 2007). How then, does the airline industry, a supposedly competitive one, get away
with price discrimination? In their research, the authors examined the above theory, pointed out by a 1994 study by Borenstein and Rose.
In their study, the authors constructed a panel data of domestic airline ticket prices, focusing on coach-class tickets issued by nine U.S. carriers between 1993 and 2006 (Gerardi and Shapiro,
2007). After analyzing the costs and markets, the authors came to the conclusion that there was more of a monopoly effect in the airline industry, as over time, when increased
competition comes along a route, price dispersion (i.e., price-setting) tends to decrease (Gerardi and Shapiro, 2007). But the study also showed that airlines can better price discriminate in more concentrated
markets (Gerardi and Shapiro, 2007). In other words, ironically enough, in markets with more traveled routes, airlines felt they could better price discriminate (especially on the lower-fare end) (Gerardi and
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