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Why Some Airfares Stay Aloft While Others Plummet


Economic Trends

WHY SOME AIRFARES STAY ALOFT WHILE OTHERS PLUMMET

Consumers incensed by wide differences in prices charged by an airline for similar trips can blame competition. According to a recent National Bureau of Economic Research study by economists Severin Borenstein and Nancy L. Rose, such price differentials tend to widen as the number of competitors on a route increases.

The explanation: Increased competition typically focuses on the kind of tickets bought by tourists--advance-purchase tickets requiring a Saturday night stay. But competition has a much smaller effect on the higher-priced unrestricted tickets that business travelers usually buy. So airlines still tend to charge relatively high prices for those seats as they reduce discount fares in response to cuts by competitors.GENE KORETZ


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