The effect of competition on price discrimination in the international flight market between the U.S. and China

- The unique price discrimination methods practiced by airlines in the international airline market are examined.
- The relationship between second degree price discrimination and market concentration is examined.
- The results suggest that there is a negative relationship between price discrimination and market competition.

This research offers new evidence on the relationship between competition and second-degree price discrimination in the airline industry using a unique micro data set on international flight ticket transactions between the U.S. and China. Due to the disaggregated nature of the transaction level data used in this analysis, I am able to precisely measure ticket restrictions/qualities and offer some plausible explanations for the restriction-specific effects of market competition on price discrimination. Overall, the results suggest that there is a negative relationship between price discrimination and market competition, which is consistent with the traditional wisdom that the ability to price discriminate will be deteriorated by less market concentration.