Advanced Search
MyIDEAS: Login

Price and Frequency Choice under Monopoly and Competition in Aviation Markets

Contents:

Author Info

  • Carlsson, Fredrik

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

Using data on 172 city-pair markets in eight European countries, we investigate the effect of the market structure on airlines choices of frequency and prices. Applying an address model, we show that equilibrium prices depend on passengers value of time, marginal flight costs and the aggregate number of flights. Furthermore, we show that under monopoly the equilibrium price is higher and the aggregate frequency is lower than under competition. The estimations show that market structure does not have any effect on Economy class ticket prices. However, market structure does have an effect on Business class ticket prices. The effects are in the expected direction: increased market concentration and decreased number of airlines results in increased ticket prices. Further, we find that applying the Herfindahl index as a measure of market concentration is restrictive and that the index instead should be decomposed. However, comparing the equilibrium price between monopoly and competitive routes we can reject the hypothesis of differences in equilibrium price. Regarding frequency choice, market structure again has a significant impact on the equilibrium prices, and the effects are as expected: decreased market concentration and an increased number of airlines results in increased aggregate frequencies. In the case of frequency we can reject the hypothesis that the aggregate frequency is the same under monopoly as it is under competition; the aggregate frequency under monopoly is found to be much lower.

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://hdl.handle.net/2077/2883
Download Restriction: no

Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 71.

as in new window
Length: 18 pages
Date of creation: 07 Jun 2002
Date of revision:
Publication status: Published in Review of Industrial Organization, 2004, pages 37-49.
Handle: RePEc:hhs:gunwpe:0071

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC

Related research

Keywords: Aviation; competition; frequency choice; address model;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Lanfranchi, Joseph & Ohlsson, Henry & Skalli, Ali, 2002. "Compensating wage differentials and shift work preferences," Economics Letters, Elsevier, vol. 74(3), pages 393-398, February.
  2. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
  3. Norman, Victor D & Strandenes, Siri Pettersen, 1990. "Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route," CEPR Discussion Papers 403, C.E.P.R. Discussion Papers.
  4. Barla, Philippe, 2000. "Firm size inequality and market power," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 693-722, July.
  5. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 2002. "European Airline Reform: An Empirical Welfare Analysis," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(2), pages 189-209, May.
  6. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  7. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  8. Severin Borenstein, 1992. "The Evolution of U.S. Airline Competition," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 45-73, Spring.
  9. Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 141-59, June.
  10. Panzar, John C, 1979. "Equilibrium and Welfare in Unregulated Airline Markets," American Economic Review, American Economic Association, vol. 69(2), pages 92-95, May.
Full references (including those not matched with items on IDEAS)

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:hhs:gunwpe:0071. 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: (Marie Andersson).

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.