On the Choice between Strategic Alliance and Merger in the Airline Sector: the Role of Strategic Effects
AbstractWe consider a market with three competitors, two of which decide to cooperate. Firms first choose capacity under demand uncertainty then compete in quantities after the uncertainty has been resolved. We specify strategic alliance (SA) as an agreement where two airlines jointly choose capacity and divide it among themselves. Contrary to the full merger case, after demand is revealed the alliance members market their capacity shares independently. Our main result is that the profit of the cooperating firms is greater under SA than under full merger.
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Bibliographic InfoPaper provided by GREEN in its series Cahiers de recherche with number 0502.
Date of creation: 2005
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Strategic alliance; capacity; airline industry;
Other versions of this item:
- Philippe Barla & Christos Constantatos, 2006. "On The Choice between Strategic Alliance and Merger in the Airline Sector: The Role of Strategic Effects," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 40(3), pages 409-424, September.
- Barla, Philippe & Constantatos, Christos, 2005. "On the Choice between Strategic Alliance and Merger in the Airline Sector: the Role of Strategic Effects," Cahiers de recherche 0502, Université Laval - Département d'économique.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-COM-2005-09-11 (Industrial Competition)
- NEP-GTH-2005-09-11 (Game Theory)
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- repec:ebl:ecbull:v:12:y:2005:i:4:p:1-11 is not listed on IDEAS
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