The Impact of market structure and price discrimination strategies in the airline sector

This paper investigates which factors influence airlines’ decisions when planning pricing strategies. We explore the impact of market structure and airlines pricing behaviour in a specific geographical context characterised by a low level of intermodal competition. The data used is, in fact, collected on a sample of southern Italian routes, for which alternative accessibility through different modes of transport is limited. We focus primarily on a specific type of pricing strategy: the intertemporal price discrimination (IPD). The IPD consists in charging different fares to different travellers according to the days missing to departure when the ticket is bought. The work aims to verify whether market’s concentration levels play a significant role in defining fare levels and, more in particular, whether airlines are more or less keen to engage in IPD when competition increases or when it reduces. The paper is structured as follows. In Section 2 we survey the relevant literature; the data collection is described Section 3 and in Section 4 we present the empirical strategy. Afterward, in Section 5 we discuss the main outcomes and in Section 6 we draw some conclusions.

An Analysis of Maritime Ro-Ro Freight Transport Service Attributes through Adaptive Stated Preference: an Application to a Sample of Freight Forwarders

In this paper we present preliminary evidence from a pilot study carried out with the primary objective of testing the validity of adaptive conjoint data collecting methods in analysing operators’ preferences when redirecting current on-land transport services to a hypothetical maritime ro-ro service alternative. The analysis has focussed on a sample of freight forwarders. Through a combination of Revealed Preferences and Adaptive Stated Preference Experiments we have constructed a database of their preferences’ toward the maritime ro-ro alternative using a set of transport service attributes: price, reliability, frequency, transit time, etc. We have estimated the relevant parameters through a Tobit model and have been able to calculate relative trade-off values among the significant attributes. The resulting ranking highlights the relative importance of reliability and frequency in the decision to switch to maritime services

One price for all? Price discrimination and market captivity: Evidence from the Italian city-pair markets

This paper tests whether, and to what extent, airlines exploit market captivity by using price discrimination strategies. The Italian passenger market is particularly fit for this purpose, given the high differentials in the degree of the inter-modal competition amongst domestic connections. Results show that, ceteris paribus, airlines adopt a different pricing behaviour depending on the degree of inter-modal market captivity. First, in highly con- centrated markets with respect to air competitors, airlines price higher when the inter-modal competition is limited. This proves that inter-modal market captivity strengthens the effect of market power. Second, the inter-temporal price discrimination leads to a J-shaped distribution of fares over time, which is more pronounced when the inter-modal competition is effective. This suggests that airlines need to adopt a pricing technique that allows for a greater market segmentation in order to compete successfully with high-speed rail transport and to extract a larger part of passengers’ surplus. These results are relevant in terms of transport-investment implications and competition policy. The indirect benefits that investments in rail infrastructure would yield through downward pressures on competing airline fares should be embedded in any cost-benefit analysis of high-speed networks investments and in any policy evaluation of measures that aim to reduce the territorial gaps in infrastructure endowment and accessibilit

Pay cycles and fuel price : a quasi experimental approach

This paper studies the daily price fixing behaviour of the Spanish fuel stations. Using a difference-in-differences approach, we show that low-cost and independent operators take advantage of needier consumers. Their prices increase on the day the unemployed workers receive their subsidy from the government, whereas, on the same day, branded companies decrease their prices. Retailers, aware of this, raise the price when they know demand increases. This phenomenon emphasises the effect of pay cycles on consumer choices and their related economic impact. Findings are also relevant for Antitrust authorities which generally focus on the activities of major brands’ stations

Spatial competition and efficiency : an investigation in the airport sector

This paper analyses the potential impact of airport competition on technical efficiency by applying the spatial stochastic frontier approach (SSFA) rather than traditional model (SFA). The SSFA allows to isolate the cross-sectional spatial dependence and to evaluate the role of intangible factors in influencing the airport economic performance, through the inclusion of the distance matrix and the shared destinations matrix, calibrated for different distances. By analysing statistical differences between the traditional and the spatial model, it is possible to identify the competition effects. This study includes 206 airports at worldwide level. First, the results show the existence of the spatial component, that could not be otherwise captured by the traditional SFA. Moreover, airport competition is found to affect the efficiency level with either a positive or a negative effect, depending on the distance considered in the spatial model

L’effetto della liberalizzazione ferroviaria sulle politiche di prezzo delle compagnie aeree e ferroviarie. Evidenze preliminari sui principali collegamenti ad Alta Velocità in Italia

Il mercato italiano del trasporto ferroviario passeggeri è stato recentemente caratterizzato dall'ingresso di un nuovo operatore nel settore dell'Alta Velocità, Nuovo Trasporto Viaggiatori (NTV). L'ingresso di NTV ha stimolato sia la concorrenza intramodale con l’incumbent Trenitalia sia la concorrenza intermodale con le compagnie aeree. Il presente lavoro si propone di studiare le strategie di pricing nel mercato del trasporto passeggeri, con il duplice l'obiettivo di esplorare l'effetto della concorrenza intramodale sulle tariffe degli operatori ferroviari - applicate sulle principali rotte Italiane servite dall’Alta Velocità (AV) - e di analizzare l'effetto della concorrenza intermodale sulle strategie di prezzo delle compagnie aeree. I risultati dell'analisi evidenziano che le due compagnie ferroviarie che operano nel segmento AV pongono in essere una politica di prezzo strategica, sebbene eterogenea fra le rotte. Inoltre, le compagnie aeree riducono in misura consistente le tariffe quando operano in concorrenza diretta con i servizi ad AV

The impact of open access on intra- and inter-modal rail competition. A national level analysis in Italy

During 2012 the Italian passenger market has experienced the entry of a new operator, Nuovo Trasporto Viaggiatori (NTV) on the high speed rail (HSR) market segment, in competition with the incumbent Trenitalia. The Italian market is the first and most extensive case in Europe where two railway companies compete for HSR services on open access basis. In this paper we empirically explore the competitive effects of the newcomer’s entry in the passenger market tackling two issues. First, we study price and capacity effects of the stemming intra-modal competition. Second, we measure the impact of inter-modal competition by HSR on airline pricing behaviour. The results show that the two railway companies engage in strategic pricing, although to a different degree on different routes and that capacity and frequency are strategic variables. We also find that airlines significantly reduce fares when flights are in direct competition with HSR services

A relative measure of urban sprawl for Italian municipalities using satellite Light Images

At the local level, the lower the urban density, the higher the per-capita length of collector roads and the area covered by buildings and infrastructures. It follows that the lower the urban density, the higher the municipal luminosity. For this reason, night-time light is often used in order to evaluate the degree of urbanization and urban sprawl in a specific territory by means of specific indicators. However, to the best of our knowledge, these indicators are based on an absolute evaluation of the urban sprawl, without taking into account the peculiar economic and demographic characteristics of the urban centres. In this paper we propose a regression-based measure of urban sprawl “relative” to the economic activity and to other socio-demographic characteristics of municipalities. We apply this methodology to the Italian context, considering all Italian municipalities inside the 15 ordinary regions over the period 2004- 2012. The measure we propose, thus, takes into account also a time element