Price Dispersion in the Airline Industry: A Conceptual Framework and Empirical Analysis

Abstract

Price dispersion can influence product demand, firm profitability, and social welfare. The authors develop a framework centered on understanding the effects of competition and market structure on price dispersion. An empirical analysis evaluates the effects of competition in a multi-market context on price dispersion in the airline industry by focusing on competition and market characteristics. The results of this study show that multi-market contact between rival firms and the interaction of multi-market contact and market concentration have significant effects on price dispersion. This study provides valuable insights for developing marketing strategies and extends the stream of research on price dispersion.