Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107852
Authors: 
Czerny, Achim I.
Zhang, Anming
Year of Publication: 
2014
Series/Report no.: 
Tinbergen Institute Discussion Paper 14-140/VIII
Abstract: 
This paper analyzes third-degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served. The model features the business-passenger and leisure-passenger markets where business passengers exhibit a higher time valuation, and a less price-elastic demand, than leisure passengers. Our main result is the identification of the time-valuation effect of price discrimination, which can work in the opposite direction as the well-known output effect on welfare. This time-valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output.
Subjects: 
Price discrimination
congestion
time valuation
monopoly
airline
JEL: 
D42
L93
Document Type: 
Working Paper

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