Location-Price Competition in Airline Networks

This paper addresses location-then-price competition in airline market as a two-stage game of n players on the graph. Passenger’s demand distribution is described by multinomial logit model. Equilibrium in price game is computed through best response dynamics. We solve location game using backward induction, knowing that airlines will choose prices from equilibrium for the second-stage game. Some numerical results for airline market under consideration are presented

A Dynamic Game of Airline Network Competition: Hub-and-Spoke Networks and Entry Deterrence

In a hub-and-spoke network, the total profit function of an airline is supermodular with respect to its entry decisions at different city-pairs. This source of complementarity implies that a hub-and-spoke network can be an effective strategy to deter entry of competitors. This paper presents a dynamic game of airlines network competition that incorporates this entry deterrence motive for using hub-and-spoke networks. We summarize the results of the estimation of the model, with particular attention to empirical evidence on the entry deterrence motive.Airline networks; Hub-and-spoke; Entry deterrence; Dynamic games; Supermodularity

Shifting Spatialities of Power: The Case of Australasian Aviation

This paper explores how different modalities, spatialities and scales of power operate in a geopolitical context. By tracing the dynamic and shifting economic geographies of state and firm power in the events leading up to the collapse of a major Australian firm, Ansett Airlines, it reveals the difference that place and position make to the creation and use of power. The paper stresses agents’ relational positioning, their ‘places’ in multiple networks of association and the ways in which their past actions and visions of the future condition their strategic options. The paper contextualises the workings of power and explores how power relationships are re-configured in specific contested events. It concludes that power cannot be separated from the spatial and temporal dimensions of actual contexts, from actor’s positions in contexts, or from their strategic objective

Deregulation and Schedule Competition in Simple Airline Networks

The present paper investigates the choice of route network, frequencies and ticket prices in air transport networks served by oligopolists. The paper describes these choices in a simple airline network by means of a simulation model. Airline competition is modeled as a 2 stage game: airlines first choose a particular flight schedule in a network, and in the second stage, airlines choose ticket prices. This simulation model thus describes airline profit maximizing behaviour in a given network environment. The model may now serve as a basis to address particular policy related questions. One such question is the welfare effect of airline deregulation. The welfare consequences resulting from the deregulation of airline markets have been investigated quite amply, both theoretically and empirically. In most cases, deregulation has been demonstrated to confer substantial benefits to consumers, and in some cases also to producers. At the same time, however, the external costs associated with aviation have become a major public policy concern in many countries. External effects - which in this case include noise, emissions and congestion - arise when markets lack: resources like peace and quiet, clean air and space are often unpriced. As a result, these resources are used in quantities beyond a social optimum. In the context of airline deregulation, it is now interesting to analyze the welfare effects caused the process of airline deregulation, taking the external costs of aviation into account. The present paper addresses this question while the network character of air transportation is taken into account.

Airline hubs: a study of determining factors & effects

A study of the determinants that influence where airlines establish hubs in the hub-and-spoke networks that developed in the industry, with identification of the quantitative effects of these determinants.Airlines ; Airline Deregulation Act of 1978

Competition and mergers in airline networks / 1523

Includes bibliographical references (p. 25)

Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design

This paper explores the effect of airline emissions charges on airfares, airline service quality, aircraft design features, and network structure, using a detailed and realistic theoretical model of competing duopoly airlines. These impacts are derived by analyzing the effects of an increase in the effective price of fuel, which is the path by which emissions charges will alter airline choices. The results show that emission charges will raise fares, reduce flight frequency, increase load factors, and raise aircraft fuel efficiency, while having no effect on aircraft size. Given that these adjustments occur in response to the treatment of an emissions externality that is currently unaddressed, they represent efficient changes that move society closer to a social optimum.emissions, airlines

TACA

The airline industry is energy intensive, has high fixed costs and its demand is very sensitive to the economic cycle. After the industry worldwide undergoes deregulation, starting with the United States in 1978, two distinct business models develop. Traditional carriers operate hub and spoke networks, offer onboard service and engage in price discrimination, whereas low cost carriers operate point to point, charge for all services and have simple tariffs. TACA begins operations in Central America in 1931 and, by 1943, has a footprint that extends from the United States to Argentina. In 1998–2001 TACA faces increased competition and a significant market downturn. In 2004 TACA CEO Roberto Kriete launches Centroamérica Fácil to stimulate air traffic in the airline\u27s base countries

Price-concentration analysis in merger cases with differentiated products

This paper considers the empirical assessment of the relationship between prices and number of firms in local markets in geographic or, more generally, characteristic space and its use as evidence in merger cases. It outlines a structural, semi-nonparametric econometric model of competition in such markets, examines its testable implications in terms of price-concentration relationships, and demonstrates that the model is non-parametrically identified. This general approach to price-concentration analysis in differentiated product markets is illustrated in a small-scale application to cinemas in the UK. The application highlights the main decision points faced by an authority when assessing the weight that can be attached to this type of analysis as evidence

Regulation and Incentives in European Aviation

We study the effect of liberalization on costs and competition in the European airline industry. We construct and estimate a model that includes demand, capacity, and cost equations. The latter accounts for inefficiency and cost-reducing effort. We show that failure to account for the choice of effort would lead to biased estimates of efficiency and competition in the industry. We also find that the last European Union package of deregulatory measures has led to significant efficiency improvements and has fostered competition.Publicad