Exploring Network Effects of Point-to-Point Networks: An Investigation of the Spatial Entry Patterns of Southwest Airlines
AbstractThis paper explores network effects in Point-to-Point airline networks by examining the spatial entry patterns of Southwest airlines during the 1990-2006 period. Estimation results from a spatial probit model reveal clear spatial dependence in profitability across different routes served by the carrier. Detailed investigation suggests two main sources of network effects, namely: (1) airport and regional presence, and (2) substitutability of markets. Findings of the paper suggest also that the network effects embedded in Southwest’s Point-to-Point network have many distinguishing features as compared to those identified in a typical Hub-and-Spoke network. This study brings some fresh insights on airline network effects in general, as well as explaining the pattern of aggressive network expansions of LCCs in particular.
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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-21.
Length: 37 pages
Date of creation: Nov 2008
Date of revision:
Point-to-Point Networks; spatial entry patterns; Southwest airlines; spatial probit model;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-03 (All new papers)
- NEP-COM-2009-01-03 (Industrial Competition)
- NEP-GEO-2009-01-03 (Economic Geography)
- NEP-NET-2009-01-03 (Network Economics)
- NEP-SOC-2009-01-03 (Social Norms & Social Capital)
- NEP-URE-2009-01-03 (Urban & Real Estate Economics)
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