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Full-Text Articles in Social and Behavioral Sciences
Price Effects And Switching Costs Of Airlines Frequent Flyer Program, Claudio A. Agostini, Manuel Willington
Price Effects And Switching Costs Of Airlines Frequent Flyer Program, Claudio A. Agostini, Manuel Willington
Claudio A. Agostini
Frequent flier programs create a switching cost for the consumer and allow firms to exercise market power. In Chile there is a dominant airline in domestic markets that has a frequent flyer program with a large number of affiliates and it faces some competition from two small carriers that do have a frequent flyer program. Using a unique dataset for Chile we estimate the switching cost of each airline and the impact of the dominant airline frequent flyer program on prices. The results show a fare premium of around 18% due to the frequent flyer program.
Price Discrimination Through Refund Contracts In Airlines, Diego Escobari, Paan Jindapon
Price Discrimination Through Refund Contracts In Airlines, Diego Escobari, Paan Jindapon
Paan Jindapon
This paper shows how an airline monopoly uses refundable and non-refundable tickets to screen consumers who are uncertain about their travel. Our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved. Using an original data set from U.S. airline markets, we find strong evidence supporting our model. Price-discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand.