Price Discrimination in the Online Airline Market: An Empirical Study

Abstract

Big Data technologies have significantly increased the possibility for sellers to adopt personalisation strategies, especially in digital markets. Among such strategies, price discrimination, a practice where the same commodity is sold at different prices, either to the same customer or to different customers, stands out. Particularly, the online airline ticket market has risen the attention of economists in recent studies, both because of its specificity and of the high data availability. This manuscript enters the debate and analyses the airline ticket market in an original way. Indeed, the aim of this work is to empirically understand whether some airline companies discriminate in prices by using the customers’ data that they collect from their websites, and, if so, which is the impact on social welfare. For performing this assessment, a software that is able to automatically collect pricing data is developed and freely released. By executing the software in two time periods, tickets prices of three airlines, three itineraries, and four different user profiles are acquired. A double analysis is performed to check if customers’ information are used to discriminate (intra-user), and if different prices are offered to distinct user profiles (inter-user). Moreover, the analyses consider control data collected from the API of the Global Distribution System Amadeus, the main flight booking platform dedicated to travel agents. Upon inspection, no evidence is found in this study to support the hypothesis that airlines use price discrimination techniques.