Market heterogeneity and the relationship between competition and price dispersion : evidence from the U.S. airline market
Howell, Charles Baird (Universitat Autònoma de Barcelona. Departament d'Empresa)
Grifell-Tatjé, Emili (Universitat Autònoma de Barcelona. Departament d'Empresa)

Data:	2022
Resum:	Previous studies agree that competition influences price dispersion, however there is disagreement on the direction of the effect. To explain this contradiction in findings we include a measure not typically considered in competitive analysis, the level of market heterogeneity. We find that the response of price dispersion to changes in competition is conditioned by differentiation. When products in a market are homogenous, increasing competition reduces price dispersion, while in a market with heterogeneous products, the same increase in competition increases price dispersion. We include an output attribute index as a control for market heterogeneity and test our method on 73,981 observations of airfare data from 2002 through 2016. The implication of our findings for policymakers is that the traditional measures of market concentration do not determine the level of competition alone. Decisions on allowing or disallowing mergers should consider market heterogeneity, not just concentration. The results of this work contribute toward extending knowledge on the effect of competition on price dispersion and introduce a method of measuring market differentiation.
Ajuts:	Agència de Gestió d'Ajuts Universitaris i de Recerca 2017/SGR-1036 Agencia Estatal de Investigación PID2020-114460GB-C31
Nota:	Altres ajuts: acords transformatius de la UAB
Drets:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Llengua:	Anglès
Document:	Article ; recerca ; Versió publicada
Matèria:	Price discrimination ; Product differentiation ; Pricing ; Airline industry ; Output attribute index ; Firm heterogeneity
Publicat a:	Transport Policy, Vol. 125 (September 2022) , p. 218-230, ISSN 1879-310X

DOI: 10.1016/j.tranpol.2022.06.001

13 p, 624.7 KB

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