Airline cooperation effects on airfare distribution: An auction-model-based approach

Airline alliances have a long history yet there is no academic consensus on how they affect price levels and their impact dispersion has not been studied. We address this question using novel methodology motivated by the service homogenization increased competition in industry recent years. Establishing an equivalence between online sales process reverse English auction, we use methods from auction econometrics to work new way with standard data set: individual ticket where only aggregated prices used past. Applicable other industries sellers compete prices, approach allows us reconsider effect of airline distribution airfares US domestic market. find lower mean markets airlines belong alliance as result variability costs. The apply here can be study any individualized which are now prevalent since advent digital economy.