Price variation: an empirical study of the US domestic airline market

This MPhil thesis examines price variation across routes, airlines and years, in the US domestic airline industry. I conduct a two-staged panel data analysis on domestic passenger flights, where the data cover the second quarter of every year in the period 1993-2017. In the first stage, I examine the historical path of every decile of ticket fares by year. In the second stage, I run a variance decomposition analysis of the log fares of flights, to determine the factors that contribute to price variation.

The results of the variance decomposition process indicate that the variance of the market fixed effects (FE) contributed the most to the variance of flight fares, while the contribution of the variance of the airline FE was small.