PRICE DISCRIMINATION IN THE AIRLINE INDUSTRY
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Academic Journal Incorporations
Abstract
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For the long period of time, price discrimination was considered as a result of monopoly power. However, this particular strategy can also be conducted by oligopolies. Although, their ability to price discriminate is weaker in comparison with pure monopolies. The general purpose of this pricing method is to increase profits of the firm by setting significant price dispersion on the same product or service and consequently preventing entrance of the new competitor into the market. Economic theory propounds that produced goods or services should be based on cost that has been spent on it.
Keywords
market segmentation, competition and price discrimination, airline industry, revenue budget, price-inelastic demand.