Abstract
This paper seeks to examine the relationship between price discrimination and market competition before and after the outbreak of Covid-19 in the US busiest flight route, from Los Angeles airport, LAX to New York airport, JFK as a representation of the U.S. airline market. Scholars hitherto have long been focused on the effect of market concentration on price dispersion. There are two main conflicting theories that determine the relationship, the monopoly effect, and the branding effect. We analyze the air lane from Los Angeles to New York in two time periods, one from 2018 to 2020, and the other from 2020 to 2022 to see if Covid-19 changes the dominance of one effect over the other. The results of our study show that market competition has a positive effect on price discrimination during the pre-Covid period while revealing a negative effect on price discrimination after the outbreak. We conclude from the results that the branding effect dominates the LAX-JFK market before Covid-19, which means that higher competition increases the capability of a firm to charge different prices for different segments of customers whereas the monopoly effect overturns after the Covid-19 pandemic.
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