Separating between unobserved consumer types: evidence from airlines

Authors

Diego Escobari, The University of Texas Rio Grande ValleyFollow
Manuel A. Hernandez

Document Type

Article

Publication Date

10-31-2018

Abstract

We propose an alternative approach to identify unobserved consumer types and assess whether firms price discriminate. Unlike other screening schemes that rely on quantity discounts or product differentiation, in our finite mixture structure individuals have unit demands and the product is homogeneous. We implement the model using an original U.S. airlines data set. The results support the existence of two demand types. The high-type “business” traveler is less price sensitive, has a higher valuation, and pays a higher price than the low type “tourist.” The proportion of high types also increases as the departure date nears. (JEL C23, L93, R41)

Comments

Original published version available at https://doi.org/10.1111/ecin.12736 https://onlinelibrary.wiley.com/share/NRSIXS4WV3YK3NMFJVUW?target=10.1111/ecin.12736

Recommended Citation

Escobari, Diego, and Manuel A. Hernandez. "Separating between unobserved consumer types: evidence from airlines." Economic Inquiry 57.2 (2019): 1215-1230. https://doi.org/10.1111/ecin.12736

Publication Title

Economic Inquiry

DOI

10.1111/ecin.12736