Fare dispersions in airline markets: A quantitative assessment of theoretical explanations

There are substantial fare dispersions in the airline industry There are various theoretical explanations of this, but they only provide a qualitative justification of the phenomenon This paper simulates the quantitative outcome of three popular models to evaluate their ability to generate substantial fare dispersions We find that, in duopoly, the maximum fare dispersion that each model can generate is quite limited, and even for the most favourable case, It IS about one-third of the observed fare variability Moving to more competitive market structures, however, some models generate better results (C) 2009 Elsevier Ltd All rights reserved