Advanced Search
MyIDEAS: Login to save this article or follow this journal

Localized competitive advantage and price reactions to entry: Full-service vs. low-cost airlines in recently liberalized emerging markets


Author Info

  • Oliveira, Alessandro V.M.
  • Huse, Cristian


This paper empirically investigates price reactions to the entry of the low-cost carrier Gol Airlines in the Brazilian domestic market in 2001. Given the substantial reduction in unconditional yields of the incumbent airlines on routes actually entered by Gol, we perform an econometric analysis of the determinants of pricing power along with the analysis of the pattern of price reactions by incumbent legacy carriers. Using data from a panel of routes disaggregated at the airline level, we obtain that (i) both airport and route presence are relevant at explaining pricing behavior; (ii) price responses vary significantly according to flight distance and the amount of seats supplied by the entrant, in the sense that the shorter the route, and the more the seats offered by the newcomer, the stronger the price reactions from the incumbents, with significant point estimates in the range 22-26% in yield reduction for routes as short as 350Â km (approx. 195 miles). More generally, the results shed light on the impacts of airline deregulation in emerging markets and the issue of localized competitive advantage due to product differentiation in the industry.

Download Info

If 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.
File URL:
Download Restriction: Full text for ScienceDirect subscribers only

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 Info

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

Volume (Year): 45 (2009)
Issue (Month): 2 (March)
Pages: 307-320

as in new window
Handle: RePEc:eee:transe:v:45:y:2009:i:2:p:307-320

Contact details of provider:
Web page:

Order Information:

Related research

Keywords: Industrial organization Entry Low-cost carrier Price reactions;


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Xavier Fageda, 2014. "“What hurts the dominant airlines at hub airports?”," IREA Working Papers 201414, University of Barcelona, Research Institute of Applied Economics, revised May 2014.
  2. Hideki Murakami, 2012. "Dynamic Effect of Low-Cost Entry on the Conduct Parameter: An Early-Stage Analysis of Southwest Airlines and America West Airlines," Discussion Papers 2012-25, Kobe University, Graduate School of Business Administration.
  3. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:45:y:2009:i:2:p:307-320. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.