Advanced Search
MyIDEAS: Login

'Flying Under Radar': Southwest Airlines And Incumbents¡¯ Response To Entry

Contents:

Author Info

  • Jun-Byoung Oh

    ()
    (Inha University)

Registered author(s):

    Abstract

    This paper investigates the competitive effect of Southwest Airlines, considering the factors affecting its decision to offer service in particular city-pairs and the effect of Southwest¡¯s presence on overall fares and the fare distribution of major airlines. Southwest is a formidable, apparently low-cost competitor when it is present it often garners a large share and creates significant fare pressure on major airlines. Despite this competitive success Southwest¡¯s network does not include service to many destinations, limiting its competitive effect. We investigate the factors affecting Southwest¡¯s decision to offer service, including the effect of Southwest on overall fares and the fare distribution of major airlines. We find that ¡®network efficiency¡¯ complementing inefficiency of hub-and-spoke network is one of the key factors explaining Southwest¡¯s selective entry and subsequent share. The ability of Southwest to offer more efficient network service then limits the markets where it operates. We also document empirical evidence that Southwest¡¯s presence decreases the fare dispersion of major airlines leading more fare reduction of high-valued customers rather than low-valued, price-sensitive customers. This results also support the hypothesis that ¡®network efficiency¡¯ is one of the key elements explaining Southwest¡¯s success.

    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: http://www.jed.or.kr/full-text/31-1/31-1-9.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 31 (2006)
    Issue (Month): 1 (June)
    Pages: 149-171

    as in new window
    Handle: RePEc:jed:journl:v:31:y:2006:i:1:p:149-171

    Contact details of provider:
    Web page: http://www.jed.or.kr/
    More information through EDIRC

    Related research

    Keywords: Network Efficiency; Entry; Incumbent¡¯s Response; Price Dispersion;

    Find related papers by JEL classification:

    References

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

    Citations

    Lists

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

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:jed:journl:v:31:y:2006:i:1:p:149-171. 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: (Changhui Kang).

    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.