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Prices and Departures in European Domestic Aviation Markets

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  • Fredrik Carlsson

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Abstract

Using data on 172 domestic city-pair markets in eight European countries, we investigate the effect of the market structure on airlines choices of departures and prices. We find that flag carriers have a higher number of departures than other airlines and that it is more likely that flag carriers are monopolists. At the same time flag carriers do not have a higher ticket price than other airlines. The influence of market power, measured with the Herfindahl index, does not have a significant effect on ticket prices, but a significant effect on the number of departures: decreased market concentration and an increased number of airlines results in increased aggregate frequencies. Comparing the predicted ticket prices, at sample mean, between monopoly and non-monopoly routes we can reject the hypothesis of differences in equilibrium price. However, the predicted aggregate number of departures, calculated at sample mean, is significantly higher at non-monopoly routes compared with monopoly routes.

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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 24 (2004)
Issue (Month): 1 (02)
Pages: 37-49

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Handle: RePEc:kap:revind:v:24:y:2004:i:1:p:37-49

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Web page: http://www.springerlink.com/link.asp?id=100336

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Cited by:
  1. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2009. "Scheduled Service Versus Personal Transportation: The Role of Distance," Working Papers 2072/15846, Universitat Rovira i Virgili, Department of Economics.
  2. Richard Chiburis & Michael Lokshin, 2007. "Maximum likelihood and two-step estimation of an ordered-probit selection model," Stata Journal, StataCorp LP, vol. 7(2), pages 167-182, June.
  3. Bergantino, Angela Stefania & Capozza, Claudia, 2013. "Airline Pricing Behaviour under Limited Intermodal Competition," MPRA Paper 48892, University Library of Munich, Germany, revised 27 Nov 2013.
  4. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer, vol. 28(4), pages 379-399, June.
  5. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
  6. Claudio A. Piga & Enrico Bachis, 2007. "Hub Premium, Airport Dominance and Market Power in the European Airline Industry," Discussion Paper Series 2007_11, Department of Economics, Loughborough University, revised Apr 2007.
  7. Alderighi, Marco, 2010. "Fare dispersions in airline markets: A quantitative assessment of theoretical explanations," Journal of Air Transport Management, Elsevier, vol. 16(3), pages 144-150.

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