A positive relationship between competitive pressure and technical efficien
cy has been demonstrated by several studies; other studies hold forth that
airline markets behave strategically. We bring these two literatures togeth
er by presenting a time series methodology to examine strategic pricing beh
avior and discussing the implications for airline efficiency. We find evide
nce of dynamic, route-level, parallel (i.e. strategic) pricing despite high
ly variable price structures. A stable price relationship is consistent wit
h successful coordination of dynamic oligopolists and may highlight those r
outes where significant market power exists. In light of previous research,
this indicates that the airlines on these routes may not be attaining maxi
mum technical efficiency. For policy makers, this methodology is useful for
analyzing other markets which behave strategically.