Airline Pricing Behaviour Under Limited Intermodal Competition

Abstract

This paper empirically analyses airline pricing for short-haul ‡ights in contexts with no credible threat of inter-modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air-related competition. We show, in fact, that market power matters, depending on the level of intra-modal competition, and that airlines apply di¤erentiated mark-ups. Besides, consistent with the implementation of inter-temporal price discrimination (IPD), we …nd a nonmonotonic inter-temporal pro…le of fares with a turning point included in the interval of the 43 th to 45 th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD.

The impact of open access on intra- and inter-modal rail competition. A national level analysis in Italy

“…Moreover, this hypothesis is supported by the "grandfather's rights" in the European Union, which guarantee to an airline, holding and using a slot in the previous year, to retain the right to use that slot the next year in the same season. Finally, Bergantino and Capozza (2015) empirically show the exogeneity of airline market share in the short run by implementing the econometric methodology developed by Boreinstein (1989).…”

One price for all? Price discrimination and market captivity: Evidence from the Italian city-pair markets

“…As a result, the inter-temporal profile of fares is J-shaped as it reflects a pattern opposite to that of travellers' demand elasticity. Finally, Bergantino and Capozza (2015), to shed light on pricing behaviour in response to the pure air-related competition, investigate airline pricing for short-haul flights in contexts with no credible threat of intermodal competition. 4 To that purpose, the authors conduct a case-study analysis focussing on city-pair connections from the main airports of southern Italy to Rome and Milan, where rail and road transport requires, on average, more than seven times the same travelling time as airline connections.…”

Airline Pricing Behavior Under Limited Inter‐modal Competition

“…A preliminary version of this paper is Bergantino and Capozza (2012). Specifically, a 10% increase of the market share allows carriers to post up to 6.4% higher fares.…”

“…We give new interpretations for the non-monotonicity of fares' inter-temporal profile, in addition to the 1. A preliminary version of this paper is Bergantino and Capozza (2012). existing ones. Indeed, on the one hand, the nonmonotonicity would be the evidence that airlines exploit consumer-bounded rationality.…”