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Airline Network Rivalry

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Author Info
Tae Hoon Oum
Anming Zhang
Yimin Zhang
Abstract

In this paper, the effects of the strategic interaction between deregulated airlines on their network choice are analyzed. The authors examine whether switching from a linear to a hub-spoke network confers a strategic advantage because it saves costs and improves service quality. They find that, if hubbing lowers total cost (which includes both airline and passenger inconvenience costs), the pursuit of strategic advantages usually intensifies the extent of hubbing. Even if hubbing raises total cost, it might be pursued by the airline either because hubbing is a dominant strategy in an oligopolistic setting or because hubbing will be useful in deterring entry.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 28 (1995)
Issue (Month): 4a (November)
Pages: 836-57
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Handle: RePEc:cje:issued:v:28:y:1995:i:4a:p:836-57

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  1. Juan Martín & Augusto Voltes-Dorta, 2008. "Theoretical Evidence of Existing Pitfalls in Measuring Hubbing Practices in Airline Networks," Networks and Spatial Economics, Springer, vol. 8(2), pages 161-181, September. [Downloadable!] (restricted)
  2. Joseph A. Clougherty & Anming Zhang, 2008. "Domestic Rivalry and Export Performance: Theory and Evidence from International Airline Markets," Discussion Papers 225, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  3. Rafael Moner Colonques & Ricardo Flores Fillol, 2006. "Strategic Effects Of Airline Alliances," Working Papers. Serie AD 2006-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  4. David Gillen, 2006. "Airline Business Models and Networks: Regulation, Competition and Evolution in Aviation Markets," Review of Network Economics, Concept Economics, vol. 5(4), pages 366-385, December. [Downloadable!]
  5. Jan K. Brueckner & Anming Zhang, 2009. "Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Joseph A. Clougherty & Anming Zhang, 2004. "Export Orientation and Domestic Merger Policy: Theory and Some Empirical Evidence," CIG Working Papers SP II 2004-10, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  7. Jan K. Brueckner & Anming Zhang, 2009. "Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design," Working Papers 080916, University of California-Irvine, Department of Economics. [Downloadable!]
  8. Carlsson , Fredrik, 2000. "Environmental Taxation in Airline Markets," Working Papers in Economics 24, Göteborg University, Department of Economics. [Downloadable!]
  9. Rafael Moner Colonques & Ricardo Flores Fillol, 2005. "Strategic Effects Of International Airline Alliances," Working Papers. Serie AD 2005-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Brueckner, Jan K., 2002. "Network Structure and Airline Scheduling," Working Papers 02-0112, University of Illinois at Urbana-Champaign, College of Business. [Downloadable!]
  11. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2005. "Network competition - the co-existence of hub-and-spoke and point-to-point," ERSA conference papers ersa05p703, European Regional Science Association. [Downloadable!]
  12. Jon Strand & Michael Keen, 2006. "Indirect Taxes on International Aviation," IMF Working Papers 06/124, International Monetary Fund. [Downloadable!]
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  13. Cristina Barbot, 2006. "Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route," CETE Discussion Papers 0602, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  14. Ming Hsin Lin, 2005. "Alliances and entry in a simple airline network," Economics Bulletin, Economics Bulletin, vol. 12(4), pages 1-11. [Downloadable!]
  15. Laura A. Schintler & Sean P. Gorman & Aura Reggiani & Roberto Patuelli & Andy Gillespie & Peter Nijkamp & Jonathan Rutherford, 2004. "Complex Network Phenomena in Telecommunication Systems," Tinbergen Institute Discussion Papers 04-118/3, Tinbergen Institute. [Downloadable!]
  16. Sayed Ajaz Hussain & Serkan Bahceci, 2008. "Network Structure and Design in the Deregulated U.S. Airline Industry: an Argument for Re-Regulation?," Working Papers tecipa-325, University of Toronto, Department of Economics. [Downloadable!]
  17. Aguirregabiria, Victor & Ho, Chun-Yu, 2009. "A Dynamic Oligopoly Game of the US Airline Industry: Estimation and Policy Experiments," MPRA Paper 16739, University Library of Munich, Germany. [Downloadable!]
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  18. Christos Pitelis & Mirko Schnell, 2002. "Barriers to Mobility in Europe's Civil Aviation Markets: Theory and New Evidence," Review of Industrial Organization, Springer, vol. 20(2), pages 127-150, March. [Downloadable!] (restricted)
  19. Volodymyr Bilotkach, 2009. "A Framework for Modeling "Real-Life" Airline Networks," Review of Network Economics, Concept Economics, vol. 8(3), pages 255-270, September. [Downloadable!]
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