Price Discrimination In The Domestic Aviation Market

With the sustained and steady economic growth and general improvement in people's living standards, recently, the domestic air transport industry has developed fast. It transports more than 380 million people in 2007. However, the carriers also face a lot of problems, such as, low flight attendance, price wars and so on. Some economists' studies have shown that in the aviation market, the rational use of price discrimination can increase both airline revenue and social welfare.Economic theory suggests that a complete monopoly manufacturer can use price discrimination more successfully than a manufacturer under perfect competition. However, most real markets are between the two extreme states. When the competition increases, will price discrimination increases or decreases? This paper focuses on domestic aviation market, to find how price discrimination changes with the market concentration. The data used in this article is from the representative domestic airline, controlling the other factors. At last, we find that price discrimination is increasing when the market becomes more competitive.This paper is divided into five chapters. Chapter One summarizes the paper, which introduces the former researches on price discrimination and the structure of the aviation market. Chapter Two analyzes the present market, which explains the domestic aviation market structural and the means of domestic price discrimination. Chapter Three is the theoretical model, which shows that price discrimination fits the current domestic aviation market well by constructing an economic model. Chapter Four is the empirical analysis, which analyzes domestic airline fares and other information in regression, and interprets the results of the regression. Chapter Five is a summary, in accordance with the conclusions of economic analysis and the current development of our aviation industry status quo, recommending some policies.