In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that...

This paper develops an empirical model of online airfare determinants to inspect the impact of the entry of a low-cost carrier (LCC). In particular, we investigate whether the increased competition from a recently established LCC induces major carriers to respond in two competitive dimensions:...