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The spatial scope of airline competition

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  • Lijesen, Mark
  • Behrens, Christiaan

Abstract

We investigate whether alternative city- or airport pairs are viable substitutes and the extent to which they impact airline competition between the United Kingdom and continental Europe. To this end, we employ and measure airlines’ best responses in equilibrium. Using monthly airline-route seat capacity levels and two stage least-squares dummy-variables regression models, we estimate airlines’ strategic reaction to the competitors’ capacity levels, including competitors on other routes. We show that airlines’ relevant market extends beyond the airport-pair level. Strategic reactions depend on airline type, but all airline types have a similar strategic reaction towards high speed rail.

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  • Lijesen, Mark & Behrens, Christiaan, 2017. "The spatial scope of airline competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 99(C), pages 1-13.
  • Handle: RePEc:eee:transe:v:99:y:2017:i:c:p:1-13
    DOI: 10.1016/j.tre.2016.12.004
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    3. Wang, Kun & Xia, Wenyi & Zhang, Anming & Zhang, Qiong, 2018. "Effects of train speed on airline demand and price: Theory and empirical evidence from a natural experiment," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 99-130.
    4. van den Bogaard, Julien E. & Lijesen, Mark G., 2019. "Pricing of imperfect substitutes: The next flight is not the same flight," Research in Transportation Economics, Elsevier, vol. 78(C).
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    7. Li, Max Z. & Ryerson, Megan S., 2019. "Reviewing the DATAS of aviation research data: Diversity, availability, tractability, applicability, and sources," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 111-130.

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    More about this item

    Keywords

    Inter- and intramodal competition; Airline competition; Imperfect substitutes; Relevant market; High speed rail;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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