Effect of competition on price dispersion in Philippine air transport markets

• Main Author: RODOLFO, RAYMOND
• Format: text
• Published: Archīum Ateneo 2017
• Subjects: Airlines > Rates > Econometric models; Aeronautics, Commercial; Pricing; Airlines > Rates; Travel costs; Prices > Mathematical models; Monopolistic competition
• Online Access: https://archium.ateneo.edu/theses-dissertations/104; http://rizalls.lib.admu.edu.ph/#section=resource&resourceid=1213406222&currentIndex=0&view=fullDetailsDetailsTab
• Institution: Ateneo De Manila University

This study tested the hypothesis that that carriers do not seem to lose their ability to engage in discriminatory practices despite the higher intensity of rivalry. Using an original dataset of 3,714 fares collected 35 days, 28 days, 21 days, 14 days, and 7 days before a target departure date to and from the Philippines and six Asian cities, a total of 395 observations representing dispersion levels of each flight code per micro booking scenario were derived from roundtrip economy and business class fares. The results reveal a negative relationship between market concentration and price dispersion measured by coefficient of variation. This study confirmed the brand effect of competition i.e. that carriers compete more and significantly reduce their markups for the passengers at the lower tail of the fare distribution and compete less on the upper tail or customers with low demand elasticities and greater loyalty. The findings were discussed in relation to issues of competition policy and costs of doing business in the air transport industry.