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Patterns and effects of entry in US airline markets

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  • Hüschelrath, Kai
  • Müller, Kathrin

Abstract

We use T-100 traffic data and DB1B fare data from the U.S. Department of Transportation to identify patterns and effects of entry by network carriers and low-cost carriers in non-stop U.S. airline markets. For the sample period from 1996 to 2009, we find that entry activity of low-cost carriers did not only experience significant absolute increases but also led to substantial fare reductions. As route entries by network carriers do not have comparable effects, the existence and expansion of low-cost carriers must be considered as the main driver of competition in the domestic U.S. airline industry. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-059.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11059

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Keywords: Airline industry; liberalisation; entry; low-cost carriers;

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  1. Charles Boguslaski & Harumi Ito & Darin Lee, 2004. "Entry Patterns in the Southwest Airlines Route System," Review of Industrial Organization, Springer, vol. 25(3), pages 317-350, 08.
  2. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(2), pages 239-256, May.
  3. Austan Goolsbee & Chad Syverson, 2005. "How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," NBER Working Papers 11072, National Bureau of Economic Research, Inc.
  4. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
  5. Ciliberto, Federico & Tamer, Elie, 2009. "Market structure and multiple equilibria in airline markets," MPRA Paper 38635, University Library of Munich, Germany.
  6. Abraham Dunn, 2007. "Do Low-Quality Products Affect High-Quality Entry? Multiproduct Firms and Nonstop Entry in Airline Markets," EAG Discussions Papers 200712, Department of Justice, Antitrust Division.
  7. Joskow, Andrew S. & Werden, Gregory J. & Johnson, Richard L., 1994. "Entry, exit, and performance in airline markets," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 457-471, December.
  8. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
  9. Daraban, Bogdan & Fournier, Gary M., 2008. "Incumbent responses to low-cost airline entry and exit: A spatial autoregressive panel data analysis," Research in Transportation Economics, Elsevier, vol. 24(1), pages 15-24.
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Cited by:
  1. Hüschelrath, Kai & Müller, Kathrin, 2013. "Airline networks, mergers, and consumer welfare," ZEW Discussion Papers 13-028, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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