Fare dispersions in airline markets: A quantitative assessment of theoretical explanations
Journal: Air Transport Management
Author:Marco Alderighi
Published:2010
Abstract
There are substantial fare dispersions in the airline industry. There are various theoretical explanations of this, but they only provide a qualitative justification of the phenomenon. This paper simulates the quantitative outcome of three popular models to evaluate their ability to generate substantial fare dispersions.We find that, in duopoly, the maximum fare dispersion that each model can generate is quite limited; and, even for the most favourable case, it is about one-third of the observed fare variability. Moving to more competitive market structures, however, some models generate better results.
Keywords: Airline industry, Fare dispersion, Simulated results
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