Airline Competition and Network Structure
AbstractThis paper characterizes the equilibria in airline networks and their welfare implications in an unregulated environment. Competing airlines may adopt either fully-connected (FC) or hub-and-spoke (HS) network structures; and passengers exhibiting low brand loyalty to their preferred carrier choose an outside option to travel so that markets are partially served by airlines. In this context, carriers adopt hubbing strategies when costs are sufficiently low, and asymmetric equilibria where one carrier chooses a FC strategy and the other chooses a HS strategy may arise. Quite interestingly, flight frequency can become excessive under HS network configurations.
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 683.07.
Date of creation: 19 Mar 2007
Date of revision:
fully-connected networks; hub-and-spoke networks; brand loyalty; fully-served markets; partially-served markets;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-COM-2007-03-24 (Industrial Competition)
- NEP-CSE-2007-03-24 (Economics of Strategic Management)
- NEP-IND-2007-03-24 (Industrial Organization)
- NEP-MIC-2007-03-24 (Microeconomics)
- NEP-NET-2007-03-24 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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2072/15846, Universitat Rovira i Virgili, Department of Economics.
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