The Effect of Market Concentration by Joanna Stavins Economic theory suggests that a monopolist can price discriminate more successfully than can a perfectly competitive firm. Most real-life markets, however, fall somewhere in between the two extremes. This paper examines how price discrimination changes with market concentration in the airline market. The paper uses data on prices and ticket restrictions across various routes within the United States, controlling for distances and airport gate restrictions.
Price discrimination is found to increase as the markets become more competitive.
Last revised August 15, 2000.