PRICE DISCRIMINATION STRATEGIES OF LOW COST CARRIERS

• Type: Article in International Scientific Journal
• Date: 2009

Authors

Carlos Alves (Author) FEP; Cristina Barbot (Author) FEP

Journal

Title: Journal of Transport Economics and Policy

Vol. 43 No. 3

Pages: 345-363

ISSN: 0022-5258

Publisher: University of Bath

Indexing

ISI Web of Knowledge - 11 Citations

Scopus - 11 Citations

EBSCO

Scientific classification

FOS: Social sciences > Other social sciences

Other information

Authenticus ID: P-003-GAM

Abstract (EN): The low-cost carriers' (LCCs) pricing system is characterised by a single class of booking that starts with a minimum fare and then monotonically increases its value over time. This is a form of price discrimination although markets are not physically or temporally separate. Using game theory techniques, this paper shows that this Lo-Hi (low first and later high) strategy is optimal under certain ranges of fare. The paper also finds that the existence of different probabilities of consuming the good and of different willingness to pay makes it possible to separate markets in time and to profitably price discriminate.

Language: Portuguese

Type (Professor's evaluation): Scientific