Price Discrimination In The Airline Industry

PRICE DISCRIMINATION IN THE AIRLINE INDUSTRY Frode Steen and Lars Sørgard section of Economics Norwegian School of Economics and patronage political science Helleveien 30, 5045 Bergen NORWAY Emails: frode.steen@nhh.no and lars.sorgard@nhh.no Abstract: The purpose of this report is to debate the benefit effectuate of dissimilar kinds of scathe discrimination schedules that atomic number 18 used in the airline sedulousness. We distinguish between versioning, give notice to large consumers, and habitual nib programs. It is argued that versioning is probably welfare improving, in feature in a competitive scenery. Furthermore, it is argued that discounts to large firm has an equivocal effect on welfare in monopoly, while it is presumable that it is detrimental to welfare in a competitive setting or in a setting with a predominate carrier endanger by entry. Finally, we argue that frequent flyer programs have anticompetitive do in an oligopoly, and especially in a set ting where an establish is threatened by entry, so that such(prenominal) programs are pass judgment to be detrimental to welfare. subject field submitted to the committee analyzing the airline sedulousness in the Nordic countries, with members from the rival Authorities in Denmark, Finland, Norway and Sweden © Steen and Sørgard 1 1.

INTRODUCTION bell discrimination is observed in around industries. It implies that firms are charging antithetical scathes from different consumers, and that the price difference cannot be explained by greet differences. It is well hold upn that the airline industry has p racticed price discrimination for many years! . We all know that on for each one flight the passengers have paid different prices, and that in most cases we can observe that the highest price is as much as five times the lowest price. Is price discrimination a good or bad issue for the airline passengers and the nightclub? To answer such a question, we mustiness focus on the price discrimination that is most communal in this particular industry. A casual observation would be...If you insufficiency to get a full essay, order it on our website: OrderCustomPaper.com

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