A Dynamic Game of Airline Network Competition: Hub-and-Spoke Networks and Entry Deterrence
AbstractIn a hub-and-spoke network, the total profit function of an airline is supermodular with respect to its entry decisions at different city-pairs. This source of complementarity implies that a hub-and-spoke network can be an effective strategy to deter entry of competitors. This paper presents a dynamic game of airlines network competition that incorporates this entry deterrence motive for using hub-and-spoke networks. We summarize the results of the estimation of the model, with particular attention to empirical evidence on the entry deterrence motive.
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Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-379.
Length: 14 pages
Date of creation: 28 Oct 2009
Date of revision:
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Airline networks; Hub-and-spoke; Entry deterrence; Dynamic games; Supermodularity;
Other versions of this item:
- Aguirregabiria, Victor & Ho, Chun-Yu, 2010. "A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 377-382, July.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-COM-2009-11-07 (Industrial Competition)
- NEP-GTH-2009-11-07 (Game Theory)
- NEP-MIC-2009-11-07 (Microeconomics)
- NEP-NET-2009-11-07 (Network Economics)
- NEP-URE-2009-11-07 (Urban & Real Estate Economics)
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.:
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