Carriers’ pricing behaviors in the United States airline industry

This paper examines the pricing behaviors of United States air carriers in domestic markets. With quarterly observations in 2000 and 2005, we use a heteroskedasticity-adjusted Instrumental Variable technique to investigate the carriers’ pricing strategies. The results show differential pricing strategies practiced by United States air carriers. American, United, Continental, and Northwest Airlines have higher airfares than Delta and Southwest Airlines in 2005. In 2000, all the carriers, except Delta have the same relationships with airfares. Furthermore, the findings suggest that the carriers’ pricing strategies can vary under the same market condition, indicating that carriers’ managerial decisions may influence their airfares.