Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency
AbstractThis paper investigates strategic interaction among airlines in product-quality choices. Using an instrumental variables approach, the paper estimates flight-frequency reaction functions, which relate an airline’s frequency on a route to its own characteristics and to the frequencies of competing airlines. A positive reaction function slope is found in some cases, indicating the presence of strategic interaction in the choice of frequencies. The paper also asks whether multimarket contact generates mutual forbearance in frequency competition, finding no evidence for such an effect.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4066.
Date of creation: 2013
Date of revision:
airlines; reaction function; product quality; flight frequency;
Find related papers by JEL classification:
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
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