We empirically test the hypothesis that the discounts offered by firms to consumers who purchase tickets in advance increase with the intensity of competition. We develop a new measure of competition for which we use the proximity (in departure time) of a given flight to its competitors to infer...

We examine airlines' pricing behavior with respect to fuel cost fluctuations. Managerial accounting “cost-plus” pricing models assume that a firm would adjust selling prices to “pass through” an increase or decrease in the costs of inputs. We find some evidence of airline pricing power...