This study provides empirical evidence documenting how COVID-19 affects intertemporal pricing and price dispersion in the U.S. domestic airline market. Studying a unique panel of 43 million fares collected before and after the outbreak of the pandemic, we find that airlines discounted fares by an average of 57% in the first five months of the pandemic relative to the five months that immediately preceded the pandemic. We also find that flight-level prices increased at a lower rate, particularly in the last week to departure. As a consequence, flight-level price dispersion decreased. These findings are consistent with the theoretical predictions arising from models of stochastic peak-load pricing and intertemporal price discrimination.
How does COVID-19 affect intertemporal price discrimination and price dispersion? Evidence from the airline industry
Gaggero, Alberto A.
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2025-01-01
Abstract
This study provides empirical evidence documenting how COVID-19 affects intertemporal pricing and price dispersion in the U.S. domestic airline market. Studying a unique panel of 43 million fares collected before and after the outbreak of the pandemic, we find that airlines discounted fares by an average of 57% in the first five months of the pandemic relative to the five months that immediately preceded the pandemic. We also find that flight-level prices increased at a lower rate, particularly in the last week to departure. As a consequence, flight-level price dispersion decreased. These findings are consistent with the theoretical predictions arising from models of stochastic peak-load pricing and intertemporal price discrimination.File | Dimensione | Formato | |
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