Nonlinear Pricing Strategies and Market Concentration
NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY
A Dissertation by MANUEL A. HERNANDEZ GARCIA
Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY
August 2009
Major Subject: Economics
UMI Number: 3384249
All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion.
UMI 3384249 Copyright 2009 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code.
ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346
NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY
A Dissertation by MANUEL A. HERNANDEZ GARCIA
Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY
Approved by: Chair of Committee, Steven N. Wiggins Committee Members, Li Gan James Griffin Steven L. Puller Head of Department, Larry Oliver
August 2009 Major Subject: Economics
iii
ABSTRACT Nonlinear Pricing Strategies and Market Concentration in the Airline Industry. (August 2009) Manuel A. Hernandez Garcia, B.A., Universidad del Pacifico, Peru Chair of Advisory Committee: Dr. Steven N. Wiggins This dissertation investigates the effect of market concentration on nonlinear pricing strategies in the airline industry. The study develops a theoretical nonlinear pricing model with both discrete product and consumer types to derive testable implications about the impact of market concentration on the structure of relative prices within a menu of prices. The analysis then uses a
A Dissertation by MANUEL A. HERNANDEZ GARCIA
Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY
August 2009
Major Subject: Economics
UMI Number: 3384249
All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion.
UMI 3384249 Copyright 2009 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code.
ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346
NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY
A Dissertation by MANUEL A. HERNANDEZ GARCIA
Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY
Approved by: Chair of Committee, Steven N. Wiggins Committee Members, Li Gan James Griffin Steven L. Puller Head of Department, Larry Oliver
August 2009 Major Subject: Economics
iii
ABSTRACT Nonlinear Pricing Strategies and Market Concentration in the Airline Industry. (August 2009) Manuel A. Hernandez Garcia, B.A., Universidad del Pacifico, Peru Chair of Advisory Committee: Dr. Steven N. Wiggins This dissertation investigates the effect of market concentration on nonlinear pricing strategies in the airline industry. The study develops a theoretical nonlinear pricing model with both discrete product and consumer types to derive testable implications about the impact of market concentration on the structure of relative prices within a menu of prices. The analysis then uses a
References: 37 ——— “Equilibrium Price Dispersion Under Demand Uncertainty: The Roles of Costly Capacity and Market Structure,” RAND Journal of Economics 30:4 (1999b), 632–660 38 Maskin, Eric, and John Riley, “Monopoly with Incomplete Information,” RAND Journal of Economics 15:2 (1984), 171–196 39 Stavins, Joanna, “Price Discrimination in the Airline Market: The Effect of Market Concentration,” Review of Economics and Statistics 83:1 (2001), 200–202 2 δ 2 qiL 2 This section follows Piga and Poyago-Theotoky (2005)