We use unique data sets with round-the-clock posted fares and a regression discontinuity design to identify price discrimination in advance-purchase discounts. Price discrimination increases fares by 7.6% at 14 days to departure, and by 14% at 7 days to departure. While competition reduces price discrimination, it is unaffected by product variety for a multiproduct monopolist. The results show that the arbitrary thresholds of 7 and 14 days-in-advance serve as focal points for tacit collusion and to implement price discrimination in competitive markets. For round-trip tickets price discrimination depends on the days-in-advance for both the outbound and inbound flights.
Escobari, Diego; Rupp, Nicholas G.; and Meskey, Joseph, "Price Discrimination and Focal Points for Tacit Collusion: Evidence from the Airline Industry" (2018). Economics and Finance Faculty Publications and Presentations. 83.