Purchase discounts on federal holidays and adjacent shopping holidays: Evidence from the airline industry

Abstract

AbstractDiscounts during Thanksgiving and Christmas are common in a variety of retail markets. In this article, we examine whether holiday discounts extend to the airline industry. In contrast to many retail markets where purchased goods are meant for immediate consumption (e.g., groceries), goods in airline markets are often consumed in the future due to advance purchases. Exploiting a unique panel of almost 22 million fares, we find that fares purchased on a holiday for flights in the 60‐day period following the holiday are 1.9% cheaper, supporting the conjecture that airlines price discriminate when demand is lower than average or when the mix of purchasing passengers makes demand more elastic. These holiday discounts also do not vary with the level of competition, indicating that market structure has no impact on the magnitude of the holiday purchase discount.