تبعیض قیمت و تمرکز در بازارهای هواپیمایی اروپا

This article deals with the relationship between price discrimination and concentration in intra-European routes. Data on ticket prices of all flights from Nice Airport (France) to European destinations is used. The objective is to analyze how price discrimination is affected by concentration. Ticket restrictions are used as proxies for price discrimination. It is shown that concentration measured by the inequality of market shares affects the sensitivity of airline prices to purchase restrictions positively, meaning that concentration and price discrimination are negatively related.

Since the liberalization of the 1990s, European airlines have been confronted with a competitive environment through a series of three “packages” of legislation1 and the Open Sky process proposed by the US. Compared to the US, the European airline market is geographically smaller. Also, the shorter distances between major agglomerations allow stronger competition from alternative transportation, notably the high-speed train. Moreover, the shorter distances imply that for many intra-European flights, transfer via a hub is not an option. Hence, hub-and-spoke networks are not as strong as in the US. So far, the liberalization process has not led to homogeneous competition at the route level. Thus, to evaluate concentration in the European airline market, it is necessary to define each route as a specific market, which has its own market structure and concentration index. The purpose here is to explain the phenomenon of multiple prices offered in the intra-European routes that has become pervasive since the European market liberalization. A common approach to pricing in the airline market is in line with the theory of price discrimination. Airlines offer discount fares to consumers who satisfy various restrictions. These restrictions are used to sort consumers. Price discrimination is a price strategy that answers the competitive environment of carriers. Since Borenstein (1985) and Holmes (1989), the theoretical relationship between price discrimination and the degree of competition has been continuously investigated (Spulber, 1989; Champsaur and Rochet, 1989; Stole, 1995; Valletti, 2000; Rochet and Stole, 2002). These studies show that price discrimination persists and may increase as a market moves from monopoly to imperfect competition. Price discrimination behavior needs to be explored in competitive markets. Indeed, in monopoly markets, firms sort consumers on the basis of their willingness-to-pay (monopoly-type discrimination) whereas when more competition is introduced, firms must consider that consumers differ not only in regards to the utility they derive from a good, but also in regards to their preferences among different brands (competitive-type discrimination). Specifically, dealing with airline market, Gale (1993), Gale and Holmes (1992) and Gale and Holmes (1993), and Dana (1998) used advance purchase discounts as discriminatory device and concluded that there is more price discrimination and then more price dispersion in a competitive environment. This discriminatory device disperses prices and allows carriers to sort consumers in order to face airline specific constraints.2 Empirical analyses are consistent with theoretical results but few analyses specified the relationship between price discrimination and competition. Indeed, recent empirical analyses established that the more competitive the markets, the greater the price dispersion (Borenstein and Rose, 1994; Morrisson and Winston, 1995; Stavins, 2001). Borenstein and Rose (1994) explain that price dispersion may result from price discrimination. They show that the expected effect of market structure on price dispersion will depend on whether monopoly-type or competitive-type price discrimination dominates but they did not analyze the relationship between price discrimination and market structure empirically. In fact, only Stavins (2001) estimated the relationship of price discrimination with concentration. Her analysis is original in that she uses data on individual airline ticket prices and ticket restrictions across various routes within the United States. She finds a negative relationship between price discrimination and concentration on the American airlines market. The study investigates the relationship between price discrimination and concentration on the European Airlines market. As with Stavins (2001), purchase restrictions are used in order to evaluate price discrimination in airline markets. Unlike previous studies of price discrimination, we have included second- and third-degree price discrimination. We have added purchase restrictions intending to foster self-selection3 to purchase restrictions intending to segment the market on the basis of exogenous passenger's characteristics. Moreover, as the European airlines market is concerned, we have taken into account the European market structure particularities by using the Herfindahl–Hirschman decomposed index.

The empirical analysis shows that concentration has a negative effect on the level of prices in the European airlines market. This result is not supported by the empirical results for the US market. It can be explained by the structure of the European airlines market where the market shares inequality is a major determinant of the routes concentration. The European airlines routes are mainly characterized by a small number of carriers on each route. Except for monopoly, the more concentrated routes are characterized by duopoly with high inequality of market share leading to strong price competition between carriers. Second, it is found that concentration significantly and positively affects the sensitivity of airline prices to purchase restrictions. Thus, we conclude, and consistent with the literature on the US market, that price discrimination decreases with market concentration. This relationship is likely the outcome of carriers’ price discrimination behavior, which aims to attract low price elasticity of demand consumers in competitive routes.