Price Discrimination Within the Airline Industry

Paper Summary:

Since the airline industry in the United States was deregulated in 1978, there have been many articles written regarding the fares that are charged by various airlines, and the idea that price discrimination or predatory pricing may be taking place. Most of the concern that has been seen lately is much more focused on the major airlines and whether they are using predatory pricing practices, which would therefore discourage lower-cost competition from entering the field. This paper looks at five specific journal articles that deal with price discrimination and utilizes that information to discuss the hypothesis and the rationale for research into the issue. After this is done and the information examined, conclusions and recommendations are drawn regarding airline industry pricing.

Outline:
Introduction
Review of Related Literature
Model
Conclusion
Recommendations
References

From the Paper:

"It can be argued by some that the airline industry is seen as having 'an empty core,' meaning that there are not any customers that cannot be taken from one airline by a rival that is heavily price-competitive. In other words, airlines find that they are in a situation where, when the price that they charge is equalized with the minimum average cost, the capacity that they have is greater than their demand. From this it can be argued that one of the most reasonable responses to such a problem is to start developing cartels or some kind of long-term relationships between sellers and buyers."

Sample of Sources Used:

• Steven A. Morrison and Clifford Winston (1990), "The Dynamics of Airline Pricing and Competition," American Economic Review, V80 n3, pp. 389-393.
• Gregory T. Price Gundlach (1995, Fall), "Predation: Legal Limits and Antitrust Considerations," Journal of Public Policy & Marketing, V14 n2, pp. 278-289.
• Barry C. Smith, John F. Leimkuhler, and Ross M. Darrow (1992), "Yield Management at American Airlines," Interfaces, V22 n1. pp. 8-31.
• Anthony L. Velocci (1995), "U.S. airline profitability may be short-lived," Aviation Week & Space Technology, V142 n11. pp. 45-46.
• Clair Wilcox (1971), Public Policies Toward Business, Homewood, Illinois: Richard D. Irwin, Inc.

More papers on Price Discrimination Within the Airline Industry:

• Research Paper # 113592 : "Price Discrimination in the Airline Industry"
• Research Proposal # 145242 : "Antitrust Research in the Airline Industry"
• Term Paper # 132168 : "The Airline Industry and Spare Parts"

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