Concentration, Market Share, Inequality and prices: an examination of European Airline markets
Résumé
This paper investigates the link between market structure and ticket prices in intra-European airline routes. Our database contains ticket prices offered by all the carriers serving Nice Airport (France) flying to European destinations. Our analysis has two aims: first, to examine how concentration and other route- and ticket-specific factors affect offered prices; second, to test the hypothesis that higher market concentration reduces price discrimination. The market structure is examined using three measures of concentration, the Herfindahl-Hirschmart Index (HH1, the decomposed HH1, and the Gini coefficient. We find that concentration has a negative effect on the prices offered for a particular route. We also show that concentration, measured by the inequality of market shares, reduces the price discrimination practices of European carriers. In other words, our results show that the discounts offered are smaller on the least competitive routes, and consequently, price dispersion is smaller on these routes.