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A Framework for Modeling "Real-Life" Airline Networks

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Author Info
Volodymyr Bilotkach () (Department of Economics, University of California, Irvine)
Abstract

This paper develops a new model, which allows for the co-existence of hub-and-spoke and point-to-point networks in the airline industry. Passengers are segmented between the non-stop and one-stop services. In the baseline model, the monopoly airline's ability to segment the market and effectively set up the mixed network depends on the cost savings due to the through-hub service relative to exogenous quality difference between the one-stop and non-stop flights. Socially inefficient entry with the new non-stop service where an incumbent is operating the hub-and-spoke network is possible.

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 8 (2009)
Issue (Month): 3 (September)
Pages: 255-270
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rne:rneart:v:8:y:2009:i:3:p:255-270

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Web page: http://www.rnejournal.com

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Related research
Keywords: airline networks; hub-and-spoke systems; market segmentation; vertical differentiation;

References listed on IDEAS
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  1. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September. [Downloadable!] (restricted)
  2. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Blackwell Publishing, vol. 52(2), pages 291-312, 06. [Downloadable!] (restricted)
  3. Ken Hendricks & Michele Piccione & Guofu Tan, 1999. "Equilibria in Networks," Econometrica, Econometric Society, vol. 67(6), pages 1407-1434, November.
    Other versions:
  4. Kawasaki, Akio, 2008. "Network effects, heterogeneous time value and network formation in the airline market," Regional Science and Urban Economics, Elsevier, vol. 38(4), pages 388-403, July. [Downloadable!] (restricted)
  5. Jan K. Brueckner & Yimin Zhang, 2001. "A Model of Scheduling in Airline Networks: How a Hub-and-Spoke System Affects Flight Frequency, Fares and Welfare," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 195-222, May. [Downloadable!] (restricted)
  6. David Gillen, 2006. "Airline Business Models and Networks: Regulation, Competition and Evolution in Aviation Markets," Review of Network Economics, Concept Economics, vol. 5(4), pages 366-385, December. [Downloadable!]
  7. Charles Boguslaski & Harumi Ito & Darin Lee, 2004. "Entry Patterns in the Southwest Airlines Route System," Review of Industrial Organization, Springer, vol. 25(3), pages 317-350, 08. [Downloadable!] (restricted)
  8. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Hendricks, Ken & Piccione, Michele & Tan, Guofu, 1995. "The Economics of Hubs: The Case of Monopoly," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 83-99, January. [Downloadable!] (restricted)
    Other versions:
  10. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter. [Downloadable!] (restricted)
  11. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law & Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  12. Tae Hoon Oum & Anming Zhang & Yimin Zhang, 1995. "Airline Network Rivalry," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 836-57, November.
  13. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2000. "A note on the optimality of airline networks," Economics Letters, Elsevier, vol. 69(3), pages 429-434, December. [Downloadable!] (restricted)
  14. Volodymyr Bilotkach & Xavier Fageda & Ricardo Flores-Fillol, 2008. "Scheduled service versus personal transportation: the role of distance," Working Papers XREAP2008-13, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2008. [Downloadable!]
    Other versions:
  15. Jan-Christoph Düdden, 2006. "Multi-Hub Network Configurations - A Temporary or Permanent Outcome of Airline Consolidation?," Review of Network Economics, Concept Economics, vol. 5(4), pages 421-434, December. [Downloadable!]
  16. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 239-256, May. [Downloadable!] (restricted)
  17. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December. [Downloadable!] (restricted)
  18. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May. [Downloadable!] (restricted)
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This page was last updated on 2009-11-16.

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