Price Discrimination along Multiple Dimensions: Theory and New Evidence∗

This paper examines firms that simultaneously practice quality-based and inter-temporal price discrimination. A model establishes conditions under which these can operate in the same, or opposite, direction, depending on the arrival rate of various consumer types. New data provided by a regional airline reveal that, in some markets, the quality premium increases with inter-temporal price discrimination but the opposite is true in others. New survey data illustrate how the result is driven by differences in the motivation and characteristics of travelers in each market, which fully reconciles both the predictions of the model and the empirical results. ∗I thank Gaurab Aryal, Nate Baum-Snow, Rob Clark, Ricard Gil, Julie Mortimer, Eugene Orlov, Claudio Piga, Steve Puller, Henry Schneider and Alan Sorensen for helpful suggestions. I am especially grateful to Jim Dana for very useful discussions and insights. This research is funded by a SSHRC Insight Grant. †Department of Management, University of Toronto at Scarborough and Rotman School of Management, 105 St. George Street, Toronto, Ontario, M5S 3E6, Canada. Email: ambarishchandra@gmail.com