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Strategic airline alliances and endogenous Stackelberg equilibria

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  • Lin, Ming Hsin

Abstract

This paper analyzes the economic effects of the code-sharing alliances between an international and a domestic airline. If these two allied airlines and a separate unallied international airline endogenously choose the role of fare-leader or fare-follower, two types of Stackelberg equilibria exist. This finding suggests that the Stackelberg solution seems reasonable, and provides a guideline for the airlines' role-choosing. Furthermore, although this complementary alliance improves the social welfare, it decreases the consumer surplus of the direct international passengers and may decrease that of the direct domestic passengers. The negative effects should also be considered when governments evaluate a complementary alliance.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

Volume (Year): 40 (2004)
Issue (Month): 5 (September)
Pages: 357-384

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Handle: RePEc:eee:transe:v:40:y:2004:i:5:p:357-384

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Related research

Keywords: Airline alliances Hub-spoke network Stackelberg leader-follower;

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Cited by:
  1. Hattori, Keisuke & Lin, Ming Hsin, 2010. "Alliance Partner Choice in Markets with Vertical and Horizontal Externalities," MPRA Paper 25732, University Library of Munich, Germany.
  2. Socorro, M. Pilar & Viecens, M. Fernanda, 2013. "The effects of airline and high speed train integration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 160-177.
  3. 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).
  4. Lin, Ming Hsin, 2012. "Airlines-within-airlines strategies and existence of low-cost carriers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(3), pages 637-651.
  5. repec:ebl:ecbull:v:12:y:2005:i:4:p:1-11 is not listed on IDEAS
  6. Barla, Philippe & Constantatos, Christos, 2005. "On the Choice between Strategic Alliance and Merger in the Airline Sector: the Role of Strategic Effects," Cahiers de recherche 0502, GREEN.
  7. Ming Hsin Lin, 2005. "Alliances and entry in a simple airline network," Economics Bulletin, AccessEcon, vol. 12(4), pages 1-11.
  8. Lin, Ming Hsin, 2013. "Airport privatization in congested hub–spoke networks," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 51-67.

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