This paper explores airline pricing behaviour dealing with two issues. The OIˆrst is to measure the extent to which intramodal competition inaI uences fares charged to travellers. The second is to shed light on faresiI intertemporal proOIˆle to verify if airlines undertake intertemporal price discrimination (IPD) strate- gies and whether IPD is of monopolistic-type or competitive-type. Di§erently from past contributions, we study airline pricing behaviour removing the inaI u- ence of intermodal competition. To this scope, we focus on the southern Italian market since it is less accessible by other modes and thus, air transport-related competition prevails. Our results claim that when the intramodal competition reduces, airlines apply higher fares as they exploit the greater market power arising from more concentrated market structure. Further, we OIˆnd evidence that airlines do undertake IPD strategies - the intertemporal proOIˆle of fares follows a J-curve - but that they do so in more competitive markets.
{"title":"Airline Pricing Behaviour Under Limited Intermodal Competition","authors":"A. S. Bergantino, Claudia Capozza","doi":"10.2139/ssrn.2175626","DOIUrl":"https://doi.org/10.2139/ssrn.2175626","url":null,"abstract":"This paper explores airline pricing behaviour dealing with two issues. The OIˆrst is to measure the extent to which intramodal competition inaI uences fares charged to travellers. The second is to shed light on faresiI intertemporal proOIˆle to verify if airlines undertake intertemporal price discrimination (IPD) strate- gies and whether IPD is of monopolistic-type or competitive-type. Di§erently from past contributions, we study airline pricing behaviour removing the inaI u- ence of intermodal competition. To this scope, we focus on the southern Italian market since it is less accessible by other modes and thus, air transport-related competition prevails. Our results claim that when the intramodal competition reduces, airlines apply higher fares as they exploit the greater market power arising from more concentrated market structure. Further, we OIˆnd evidence that airlines do undertake IPD strategies - the intertemporal proOIˆle of fares follows a J-curve - but that they do so in more competitive markets.","PeriodicalId":216133,"journal":{"name":"MKTG: Pricing (Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114759578","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the literature on product line pricing, consumer choice is often modeled using the max-surplus choice rule. In terms of this concept, consumer preferences are represented by so-called reservation prices and the deterministic decision rule is to choose the product that provides the highest positive surplus. However, the distribution of the reservation prices often seems somewhat arbitrary. In this paper, we demonstrate how reservation prices can be obtained using discrete choice analysis and that these two concepts are not as different as often perceived in the literature. A small example illustrates this approach, using data from a discrete choice model taken from the literature.
{"title":"Consumer Choice Modeling in Product Line Pricing: Reservation Prices and Discrete Choice Theory","authors":"S. Mayer, Jochen Gönsch","doi":"10.2139/ssrn.1979492","DOIUrl":"https://doi.org/10.2139/ssrn.1979492","url":null,"abstract":"In the literature on product line pricing, consumer choice is often modeled using the max-surplus choice rule. In terms of this concept, consumer preferences are represented by so-called reservation prices and the deterministic decision rule is to choose the product that provides the highest positive surplus. However, the distribution of the reservation prices often seems somewhat arbitrary. In this paper, we demonstrate how reservation prices can be obtained using discrete choice analysis and that these two concepts are not as different as often perceived in the literature. A small example illustrates this approach, using data from a discrete choice model taken from the literature.","PeriodicalId":216133,"journal":{"name":"MKTG: Pricing (Topic)","volume":"108 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127947670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article investigates airline pricing and airport congestion charges in hub-spoke networks. When a public hub airport and two public spoke (local) airports independently levy their charges, airlines will eventually set a ticket price that overcharges the passengers for congestion delay cost and overcompensates for airline markups. Privatizing only local airports will always lead to more overcharge, whereas privatizing only the hub airport or all airports could result in lesser overcharge if the network markets are competitive. The degree of overcharge under a private hub and public local airports is always lesser than that under a public hub and private local airports, implying that privatizing a hub airport could yield higher social welfare than privatizing a local airport. Furthermore, investigation on compensation for airline markups also finds that privatizing a hub airport is preferable to privatizing a local airport. These findings have policy implications for airport privatization.
{"title":"Airline Pricing and Airport Charges in Hub-Spoke Networks with Congestion","authors":"M. Lin, Yiming Zhang","doi":"10.2139/ssrn.1939745","DOIUrl":"https://doi.org/10.2139/ssrn.1939745","url":null,"abstract":"This article investigates airline pricing and airport congestion charges in hub-spoke networks. When a public hub airport and two public spoke (local) airports independently levy their charges, airlines will eventually set a ticket price that overcharges the passengers for congestion delay cost and overcompensates for airline markups. Privatizing only local airports will always lead to more overcharge, whereas privatizing only the hub airport or all airports could result in lesser overcharge if the network markets are competitive. The degree of overcharge under a private hub and public local airports is always lesser than that under a public hub and private local airports, implying that privatizing a hub airport could yield higher social welfare than privatizing a local airport. Furthermore, investigation on compensation for airline markups also finds that privatizing a hub airport is preferable to privatizing a local airport. These findings have policy implications for airport privatization.","PeriodicalId":216133,"journal":{"name":"MKTG: Pricing (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124268563","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-06-02DOI: 10.4337/9780857935823.00022
H. Dietl, C. Jaag, Urs Trinkner
In this paper we analyzed the strategic competition between incumbent postal operators and market entrants in liberalized letter markets based on the “defender consumer model” pioneered by Hauser and Shugan (1983) and derived qualitative normative implications on how an established firm should defend its profits when facing an attack by a new competitive product. Our results extend the literature on competition in liberalized mail markets by combining pricing and positioning strategies from a marketing perspective. Our analysis highlights that incumbent postal operators can defend their market shares by differentiating their services along one or more quality dimensions. Postal services are not necessarily homogenous. If postal operators focus solely on pricing strategies they will run into the more serious problems than if they compete on quality too.
{"title":"Defending Mail Markets Against New Entrants: An Application of the Defender Model","authors":"H. Dietl, C. Jaag, Urs Trinkner","doi":"10.4337/9780857935823.00022","DOIUrl":"https://doi.org/10.4337/9780857935823.00022","url":null,"abstract":"In this paper we analyzed the strategic competition between incumbent postal operators and market entrants in liberalized letter markets based on the “defender consumer model” pioneered by Hauser and Shugan (1983) and derived qualitative normative implications on how an established firm should defend its profits when facing an attack by a new competitive product. Our results extend the literature on competition in liberalized mail markets by combining pricing and positioning strategies from a marketing perspective. Our analysis highlights that incumbent postal operators can defend their market shares by differentiating their services along one or more quality dimensions. Postal services are not necessarily homogenous. If postal operators focus solely on pricing strategies they will run into the more serious problems than if they compete on quality too.","PeriodicalId":216133,"journal":{"name":"MKTG: Pricing (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114643208","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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