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Strategic groups and product differentiation: Evidence from the Spanish airline market deregulation

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  • Ruiz-Moreno, Felipe
  • Mas-Ruiz, Francisco J.
  • Sancho-Esper, Franco M.

Abstract

We examine the rivalry of strategic groups of formerly regulated carriers and low-cost entrants. Profit effects stemming from strategic interactions at the group level and resulting in product differentiation are considered. A conjectural variations model, addressing a critique by Corts, is used to test the hypothesis that group-level effects stemming from product differentiation lead to asymmetric behaviours by both groups of carriers within and between strategic groups. The effects of group-level strategic interactions on firm performance are analysed for two of the busiest and highest density routes in the Spanish domestic market. We find evidence of asymmetric rivalry behaviour within and between strategic groups.

Suggested Citation

  • Ruiz-Moreno, Felipe & Mas-Ruiz, Francisco J. & Sancho-Esper, Franco M., 2021. "Strategic groups and product differentiation: Evidence from the Spanish airline market deregulation," Research in Transportation Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:retrec:v:90:y:2021:i:c:s0739885921000020
    DOI: 10.1016/j.retrec.2021.101030
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    More about this item

    Keywords

    Within group rivalry; Between group rivalry; Strategic groups; Product differentiation; Airline industry; Conjectural variations model; Spanish domestic market;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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