A Cournot model for analysing the effects of an open skies agreement
AbstractIn the last decades there has been a gradual liberalisation of international air transport markets through the implementation of open skies agreements which seek the deregulation of the air transport industry and consequently the functioning of the market in a freer way. The objective of this work is to study the effects of an open skies agreement in order to understand if the airlines and the consumers will benefit after the market deregulation. With this purpose, we developed a Cournot model to compare the initial situation (without agreement) and the situation after the implementation of the open skies agreement. Based on the model developed it can be concluded that the prices on international market segments where competition increases should decline after market liberalisation, thus benefiting consumers. Regarding the incumbent airlines in the market, an open skies agreement should jeopardize the airlines that fail to operate new routes after the agreement, leading to decreased profits.
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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 1311.
Length: 29 pages
Date of creation: Jun 2013
Date of revision:
Open Skies agreement; Cournot model; Effects on prices; Firms’ profits.;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-COM-2013-07-05 (Industrial Competition)
- NEP-IND-2013-07-05 (Industrial Organization)
- NEP-TRE-2013-07-05 (Transport Economics)
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