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Spatial multiproduct pricing: empirical evidence on intra-European duopoly airline markets

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Abstract:

This paper estimates a model of spatial multiproduct duopoly pricing when the location patterns differ across markets. The theoretical model suggests that the neighbouring configuration yields less competitive Nash prices than the interlaced configuration. I apply this model to data for intra-European duopoly airline markets. The empirical results support the theoretical model since I find that fares are higher on intra-European markets that exhibit neighbouring configurations in the time domain. This result suggests that price competition is reduced when each airline operates on a specific segment of the timetable (e.g. the first 12 hours of the day). Clearly, this result has several implications for policy makers and/or airport authorities in charge of awarding slots.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/000368498325732

Publication date: April 1, 1998

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