Capacity-contingent pricing and competition in the airline industry

We present evidence on the dynamic pricing strategies of airlines. We collect high-frequency price and load-factor data directly from the websites of the main players for one of the busiest flight corridors in the US. Using this information we characterize the determinants of pricing decisions. Our focus is on the role that competition plays in these decisions. We show that prices for some airlines are responsive to rival prices and load factors. Specifically, we find that even after controlling for the number of days remaining until the flight and the number of seats remaining, some airlines increase their prices as their rivals' available seats disappear.

► This paper presents descriptive evidence on dynamic pricing strategies of airlines.
► We use high-frequency price and load-factor data directly from airline websites.
► We show that some airlines respond to rival prices and load factors.
► Specifically, some airlines increase prices as rivals' available seats disappear.