Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, September 13, 2017

Airport, airline and departure time choice and substitution patterns: An empirical analysis

Diego Escobari explores Airport, airline and departure time choice and substitution patterns: An empirical analysis.

ABSTRACT: This paper uses the random-coefficients logit methodology that controls for potential endogeneity of prices and allows for general substitution patterns to estimate various demand systems. The estimation takes advantage of an original ticket-level revealed preference data set on travels from the New York City area to Toronto that contains prices and characteristics of not only flight choices but also of all non-booked alternative flights. Consistent with having higher valuations, our results show that travelers buying closer to departure have a higher utility of flying. Moreover, consumers' heterogeneity decreases as the flight date nears. At the carrier level, we identify which carriers have more price-sensitive consumers and which carriers face greater competition. In addition, the results suggest that our multi-airport metropolitan area can be considered as a single market and that JFK and Newark are relatively closer substitutes. Overall, consumers are more willing to switch to alternative carriers than between airports or departure times.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/09/airport-airline-and-departure-time-choice-and-substitution-patterns-an-empirical-analysis.html

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