MBAA 523 Written Assignment 3: Airline Pricing Research Assignment

MBAA 523
Written Assignment 3: Airline Pricing Research Assignment
This assignment is designed to show how the economic concept of price discrimination is
implemented in the airline industry and reflected in airline pricing. To obtain some limited price
data, choose any city-pair and two competing airlines. A network and low-cost-carrier make an
interesting comparison, but any airlines of interest are acceptable. For each airline, obtain the 4
prices for a typical round-trip itinerary with bookings 1 day in advance, and then for 1, 2 and 4
weeks in advance of the departure date. Itineraries with closer departure dates are more likely
to be purchased by business travelers. Leisure travelers, on the other hand, usually book well in
advance of the travel date.
To isolate the effects of advance purchase, the itineraries should depart and return the same
days of the week at approximately the same times of day. Try to avoid the influence of holidays
or other seasonal effects on demand. Use the airlines’ websites for all fare information.
In a short paper, first explain the theory of 3rd degree price discrimination as it applies to the
airline industry including a graphical model. Explain how and why airlines would choose to
practice price discrimination. Next, discuss your research methodology including the choice of
airlines, the itinerary, and source data. Then, present the data. A simple table may be the best
method for showing the itineraries and fares. Finally, discuss whether the data provide evidence
of price discrimination. Draw appropriate conclusions.
There is no page limit, but 3 to 4 pages not including the title page, reference page, and any
appendices, should be sufficient. Incorporate the standard elements of APA style including
running head, page numbers, headings, citations, and references.