Air Service Development of Local Airports and its Influence on the Formation of Aviation Networks

Abstract

This chapter focuses on strategic actions of local governments to enrich aviation services to their local airports, and analyzes the influence of these actions on the formation process of aviation networks. Air service development action gives an influence not only on the airport but also on other airports because of the existence of network externality. This study models such an interdependent and path-dependent situation as a repeated n-person non-cooperative game. Numerical analysis shows that competition between local governments using subsidies for petition flights forms a regional hub endogenously under certain conditions.