By Giovanni Alberto Tabacco
This publication provides an unique empirical research of the marketplace constitution of airline urban pair markets, laying off new mild at the workings of aggressive approaches among agencies. reading a cross-section people airline urban pairs, Tabacco proposes for the 1st time that the should be understood as a common oligopoly, every one airline marketplace being ruled by means of one to 3 airline vendors despite industry dimension. the writer questions the level to which airways intentionally hinder head-to-head festival inside urban pair markets, and attracts exciting conclusions approximately aggressive forces from the saw marketplace constitution. Uncovering a few of the major company options of the airline undefined, the ebook is of rapid relevance to managers and practitioners, in addition to educational economists.
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Additional resources for Airline Economics: An Empirical Analysis of Market Structure and Competition in the US Airline Industry
Following the argument, as set out above, of interpreting bigger size inequalities as a signal of more intense product-market competition, I can infer that each major airline, with the surprising exception of the low-cost airline Southwest, contributes to an intensiﬁcation of product-market competition. The proposed interpretation of results may be challenged by the following counterargument. A positive coefﬁcient for the leading airlines may reveal a ﬁrst mover, reputational or brand loyalty leader role.
Toughness of price competition, degree of horizontal product differentiation) which are difﬁcult to proxy or measure empirically. Fundamentally, Sutton derives a lower bound, that is the minimal level of concentration admissible, below which nothing can happen in long-run equilibrium; whereas, on and above the lower bound any market structure is consistent with the theory. Sutton looks for only robust results applicable to a large domain of industries. Motivation for this approach is given by the fact that game theoretic oligopoly models provide conclusions which depend on model’s speciﬁcations.
The ﬁnding that rival’s airport presence decreases ﬁrm’s entry further suggests evidence the result of natural oligopoly is driven by airport presence. The ﬁnding of natural oligopoly is obtained also by Ellickson (2012) for the US supermarket industry. Over the last decade, therefore, after the year covered by the data, the US airline industry has gone through a considerable consolidation of capacity with several mergers and acquisitions among the top seven airline carriers in 2006; namely, American Airlines, Delta Air Lines, Southwest Airlines, Continental, US Airways, United Airlines and Northwest Airlines.