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Airline alliances and entry deterrence

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  • Lin, Ming Hsin

Abstract

This paper investigates the role of code-sharing alliances on entry deterrence. One major carrier operates a network with one hub that links n cities. It competes with another foreign carrier on one international spoke, while the other spokes are domestic and monopolized. There exists a potential entrant on one of the domestic spokes. We demonstrate that entry may increase or decrease the major carrier's profits, depending on the network size and the degree of product differentiation. When entry decreases the profits, an alliance between incumbents can be used as a credible threat to deter entrants with no significant cost advantage.

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Bibliographic Info

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

Volume (Year): 44 (2008)
Issue (Month): 4 (July)
Pages: 637-652

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Handle: RePEc:eee:transe:v:44:y:2008:i:4:p:637-652

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Related research

Keywords: Hub-spoke network Airline alliances Entry deterrence;

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Cited by:
  1. 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.
  2. Hattori, Keisuke & Lin, Ming Hsin, 2010. "Alliance Partner Choice in Markets with Vertical and Horizontal Externalities," MPRA Paper 25732, University Library of Munich, Germany.
  3. Mahito Okura, 2009. "An economic analysis of risk management in the airline industry," Economics Bulletin, AccessEcon, vol. 29(2), pages 566-574.
  4. Ishii, Masahiro & Lee, Paul Tae-Woo & Tezuka, Koichiro & Chang, Young-Tae, 2013. "A game theoretical analysis of port competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 92-106.
  5. Lin, Ming Hsin, 2013. "Airport privatization in congested hub–spoke networks," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 51-67.
  6. Kappes, Jan Willem & Merkert, Rico, 2013. "Barriers to entry into European aviation markets revisited: A review and analysis of managerial perceptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 58-69.

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