This dissertation analyzes the sources of price dispersion due to the price discrimination in the U.S. airline industry. Using the multi-stage budgeting approach with the almost ideal demand system (AIDS) specification, we estimate demand for air travel at the airline level, and empirically decompose an airline’s own price elasticity into cross-price elasticity vis-à-vis other airlines and an industry elasticity. Conceptually, cross-price elasticity measures the responsiveness of quantity demanded of airline service offered by an airline to a unilateral change in the firm’s own price with total expenditures given, whereas the industry elasticity measures the responsiveness of total quantity of airline travel demanded to a change in the overall price of air travel. Then, we investigate the determinants of price dispersion induced by discriminatory pricing across airline routes. Our results show that cross-price elasticity of demand for air travel, reflecting competitive-type discrimination, is the key factor affecting price dispersion in the airline industry. This result is consistent with the earlier findings of Borenstein and Rose (1994), but is based on a direct test of the underlying theory of Holmes (1989).

This thesis explores the cross-price elasticity of rail and bus usage with gasoline prices. This is done to see how the short-run cross price elasticity has changed and to see if the same long-run relationship can be seen in the long run as previous pooled models. It is done in order to investigate whether policies such as higher gasoline taxes may make consumers move from car usage towards public transportation. Historically the cross-price elasticity has been around 0.2 with a higher elasticity for rail than for buses. The relationship also seemed to be greater in the long run than short run. Investigating this long run cross price elasticity for modes of public transportation separately would give greater insight into how consumers behave when gasoline prices shift. An ARDL model was therefore used to investigate the long run coefficients of gasoline prices with rail usage and bus usage separately as well as the short run coefficients. No cointegration could be found in this model for the two different modes. The results of the short-run cross-price elasticity seemed to be greater for buses as a direct effect, while it was greater at first lag for rail usage. The cross-price elasticity was lower for the period than previous studies, indicating that the cross-price elasticity may have decreased. The reasons for this cannot be concluded, but theory may explain these differences by the availability in substitutes for the periods, or lower levels of gasoline prices in recent years. This thesis therefore suggests further studies that investigate how usage of rail affects the usage of buses in metropolitan areas, and how the attributes of a modes of public transportation may change the usage of another form of public transportation.

This thesis analyzes regulation, prescription and prohibition of drugs in condition of their mutual substitution with other addictive substances in the Czech Republic; thesis investigates prices' and cross-prices' elasticities of substances and their markets. Comparison is made between regulated legal markets of alcoholic beverages and cigarettes, non-prohibitively regulated markets of pharmaceuticals and prohibited markets of illegal drugs. The thesis concludes that the demand for drugs is not price elastic. The demand for drugs is price inelastic but not perfectly price inelastic, as can be deduced based on the concept of A Theory of Rational Addiction developed by Gary S. Becker. The price of drugs, therefore, to some extent affects consumption. This opens the room to influence demand through pricing mechanism. The thesis also verifies The Theory of Economic Regulation developed by George J. Stigler and confirms that due to some substitution relationships between addictive substances it is possible speculate about the interests of producers of alcoholic beverages, cigarettes and pharmaceuticals for prohibition of drugs. Interests of producers of alcoholic beverages and cigarettes confirm their mutually complementary linkages.