A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence
AbstractIn a hub-and-spoke network, the profit function of an airline is supermodular with respect to the airline's own entry decisions for different city-pairs. This source of complementarity implies that a hub-and-spoke network can be an effective strategy for deterring the entry of competitors. This paper presents an empirical dynamic game of airline 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 special attention to empirical evidence regarding the entry deterrence motive.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 28 (2010)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505551
Dynamic games Airline networks Hub-and-spoke Entry deterrence Supermodularity;
Other versions of this item:
- Victor Aguirregabiria & Chun-Yu Ho, 2009. "A Dynamic Game of Airline Network Competition: Hub-and-Spoke Networks and Entry Deterrence," Working Papers tecipa-379, University of Toronto, Department of Economics.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter.
- Kim, Sung-Hwan, 2009. "Predatory reputation in US airline markets," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(5), pages 592-604, September.
- Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-99, May.
- Jan K. Brueckner, 2004.
"Network Structure and Airline Scheduling,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(2), pages 291-312, 06.
- Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 9(3), pages 323-342, September.
- Victor Aguirregabiria & Chun-Yu Ho, 2008.
"A Dynamic Oligopoly Game of the US Airline Industry: Estimation and Policy Experiments,"
tecipa-337, University of Toronto, Department of Economics.
- Aguirregabiria, Victor & Ho, Chun-Yu, 2012. "A dynamic oligopoly game of the US airline industry: Estimation and policy experiments," Journal of Econometrics, Elsevier, vol. 168(1), pages 156-173.
- 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.
- Victor Aguirregabiria & Pedro Mira, 2004.
"Sequential Estimation Of Dynamic Discrete Games,"
Working Papers, CEMFI
- Ken Hendricks & Michele Piccione & Guofu Tan, 1997. "Entry and Exit in Hub-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 291-303, Summer.
- Victor, Aguirregabiria, 2009.
"A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria,"
17805, University Library of Munich, Germany.
- Aguirregabiria, Victor, 2012. "A method for implementing counterfactual experiments in models with multiple equilibria," Economics Letters, Elsevier, vol. 114(2), pages 190-194.
- Victor Aguirregabiria, 2009. "A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria," Working Papers tecipa-381, University of Toronto, Department of Economics.
- Ken Hendricks & Michele Piccione & Guofu Tan, 1999. "Equilibria in Networks," Econometrica, Econometric Society, Econometric Society, vol. 67(6), pages 1407-1434, November.
- Tae Hoon Oum & Anming Zhang & Yimin Zhang, 1995. "Airline Network Rivalry," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 836-57, November.
- Hüschelrath, Kai & Müller, Kathrin, 2013. "Airline networks, mergers, and consumer welfare," ZEW Discussion Papers 13-028, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Joao Macieira, 2010. "Oblivious Equilibrium in Dynamic Discrete Games," 2010 Meeting Papers 680, Society for Economic Dynamics.
- Naoaki Minamihashi, 2012. "Natural Monopoly and Distorted Competition: Evidence from Unbundling Fiber-Optic Networks," Working Papers 12-26, Bank of Canada.
- Vera Alves & Rosa Forte, 2013. "A Cournot model for analysing the effects of an open skies agreement," CEF.UP Working Papers 1311, Universidade do Porto, Faculdade de Economia do Porto.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.