Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route
AbstractLow cost carriers (LCCs) have recently proved that they can develop aggressive behaviour towards the threat of new entrants. This paper analyses the theoretical conditions under which a low cost carrier can deter or accommodate entry by means of product proliferation, using the example of Easyjet on the London-Grenoble route. Theoretical conclusions show that they can only deter entry if they launch a service with a quality that is superior to the entrant’s and to their own previous one. Otherwise, they accommodate entry by improving their old product, when they face the entry of a full service carrier (FSC), or by launching a new service, if they are caught in the middle of a FSC and another LCC. Empirical findings about competition in the same route in monopoly, duopoly and oligopoly with three firms show that price competition depends on the existence and nature of rivals, and on the level of demand.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0602.
Length: 32 pages
Date of creation: Jan 2006
Date of revision:
low cost carriers; entry; accommodation;
Find related papers by JEL classification:
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-COM-2006-05-06 (Industrial Competition)
- NEP-CSE-2006-05-06 (Economics of Strategic Management)
- NEP-ENT-2006-05-06 (Entrepreneurship)
- NEP-IND-2006-05-06 (Industrial Organization)
- NEP-MIC-2006-05-06 (Microeconomics)
- NEP-TID-2006-05-06 (Technology & Industrial Dynamics)
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