Browsing by Subject "Peak Load Pricing"

This study works to observe and quantify the degree to which airlines engage in the phenomenon of peak load pricing. A standard PLP model is specified and applied to a monopoly airline market, and demand is estimated via OLS regression analysis at the route level for the given airline utilizing a structural break approach. The estimated demand levels are integrated back in to the original model and a reccomended peak load price premium is derived. I find that a 21.9% price premium in the case of non-binding capacity results from my observed data. This is much lower than observed premia in my own sample, but is very close when compared to a much larger sample from a previous study which finds a peak period price premium of 25.5%, suggesting the use of economic peak load pricing by airlines.