Price dispersion and competition in European airline markets

This paper tests the effects of competition on price dispersion in European airline markets. By conducting a cross-sectional analysis of some 1200 flights between more than 130 European airport pairs, we confirm recent results for the US airline industry that show a non-monotonic relationship between competition intensity and price dispersion. We link our results to recent efficiency and productivity analyses. Our findings support the hypothesis that efficient airlines are better positioned to differentiate fares than their less efficient counterparts.

► The effect of competition in price dispersion in European airline markets is analysed.
► A non-monotonic relationship between competition and price dispersion is observed.
► Efficient airlines tend to differentiate fares stronger than less efficient ones.