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Strategic airline alliances and endogenous Stackelberg equilibria

  • Lin, Ming Hsin

This paper analyzes the economic effects of the code-sharing alliances between an international and a domestic airline. If these two allied airlines and a separate unallied international airline endogenously choose the role of fare-leader or fare-follower, two types of Stackelberg equilibria exist. This finding suggests that the Stackelberg solution seems reasonable, and provides a guideline for the airlines' role-choosing. Furthermore, although this complementary alliance improves the social welfare, it decreases the consumer surplus of the direct international passengers and may decrease that of the direct domestic passengers. The negative effects should also be considered when governments evaluate a complementary alliance.

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Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

Volume (Year): 40 (2004)
Issue (Month): 5 (September)
Pages: 357-384

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Handle: RePEc:eee:transe:v:40:y:2004:i:5:p:357-384
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