IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Competition behavior in service frequency for U.S. airlines

Listed author(s):
  • Kuangnen Cheng

    ()

  • Hui-Ping Chen

    ()

  • Jason Lee

    ()

Registered author(s):

    Real-life service frequency data from markets with duopoly or oligopoly structure in the U.S. domestic airline industry is analyzed to understand whether the nature of airline competition is similar to one described by Hotelling’s law, as applied to a perishable goods market. The paired-samples t test statistic technique is employed to analyze 43,380 observations collected from thirty days worth of daily service frequencies in 1,000 largest U.S. city-pair markets. The results indicate that minimum differentiation competition behavior indeed prevails in duopoly markets. Firms are willing to locate far from the dominant player to capture consumer surplus in oligopoly markets. Copyright Springer-Verlag Berlin Heidelberg 2015

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1007/s11628-013-0215-9
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Springer & Pan-Pacific Business Association in its journal Service Business.

    Volume (Year): 9 (2015)
    Issue (Month): 1 (March)
    Pages: 1-16

    as
    in new window

    Handle: RePEc:spr:svcbiz:v:9:y:2015:i:1:p:1-16
    DOI: 10.1007/s11628-013-0215-9
    Contact details of provider: Web page: http://www.springer.com

    Web page: http://www.panpacificbusiness.org/

    Order Information: Web: http://www.springer.com/business/journal/11628

    References listed on IDEAS
    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.:

    as
    in new window


    1. Severin Borenstein & Nancy L. Rose, 2007. "How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry," NBER Working Papers 13452, National Bureau of Economic Research, Inc.
    2. B. Curtis Eaton & Richard G. Lipsey, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Oxford University Press, vol. 42(1), pages 27-49.
    3. Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
    4. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July.
    5. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
    6. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-370, March.
    7. Rath, Kali P. & Zhao, Gongyun, 2001. "Two stage equilibrium and product choice with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1441-1455, November.
    8. Brueckner, Jan K. & Lee, Darin & Singer, Ethan S., 2013. "Airline competition and domestic US airfares: A comprehensivereappraisal," Economics of Transportation, Elsevier, vol. 2(1), pages 1-17.
    9. Adler, Nicole, 2001. "Competition in a deregulated air transportation market," European Journal of Operational Research, Elsevier, vol. 129(2), pages 337-345, March.
    10. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-922, July.
    11. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    12. Kenneth Button & Jonathan Drexler, 2005. "Recovering Costs by Increasing Market Share: An Empirical Critique of the S-Curve," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 391-410, September.
    13. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
    14. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 291-312, 06.
    15. Aguirregabiria, Victor & Ho, Chun-Yu, 2012. "A dynamic oligopoly game of the US airline industry: Estimation and policy experiments," Journal of Econometrics, Elsevier, vol. 168(1), pages 156-173.
    16. Pai, Vivek, 2010. "On the factors that affect airline flight frequency and aircraft size," Journal of Air Transport Management, Elsevier, vol. 16(4), pages 169-177.
    17. Wei, Wenbin & Hansen, Mark, 2007. "Airlines' competition in aircraft size and service frequency in duopoly markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(4), pages 409-424, July.
    18. de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, vol. 53(4), pages 767-781, July.
    19. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    20. Xavier Fageda & Juan Luis Jiménez & Jordi Perdiguero, 2010. "Price rivalry in airline markets: a study of a successful strategy of a network carrier against a low-cost carrier," IREA Working Papers 201007, University of Barcelona, Research Institute of Applied Economics, revised Mar 2010.
    21. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
    22. Salvanes, Kjell G. & Steen, Frode & Sorgard, Lars, 2005. "Hotelling in the air? Flight departures in Norway," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 193-213, March.
    23. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
    24. James W. Friedman & Jacques-Francois Thisse, 1993. "Partial Collusion Fosters Minimum Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 631-645, Winter.
    25. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
    26. Richard, Oliver, 2003. "Flight frequency and mergers in airline markets," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 907-922, June.
    27. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 161-177, May.
    28. Jan K. Brueckner, 2010. "Schedule Competition Revisited," Journal of Transport Economics and Policy, University of Bath, vol. 44(3), pages 261-285, September.
    29. Picone, Gabriel A. & Ridley, David B. & Zandbergen, Paul A., 2009. "Distance decreases with differentiation: Strategic agglomeration by retailers," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 463-473, May.
    30. Suzuki, Yoshinori & Walter, Clyde Kenneth, 2001. "Potential cost savings of frequent flyer miles for business travel," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(6), pages 397-410, December.
    31. A. P. Lerner & H. W. Singer, 1937. "Some Notes on Duopoly and Spatial Competition," Journal of Political Economy, University of Chicago Press, vol. 45, pages 145-145.
    32. Jan K. Brueckner & Yimin Zhang, 2001. "A Model of Scheduling in Airline Networks: How a Hub-and-Spoke System Affects Flight Frequency, Fares and Welfare," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 195-222, May.
    33. Kristopher S. Gerardi & Adam Hale Shapiro, 2009. "Does Competition Reduce Price Dispersion? New Evidence from the Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 1-37, 02.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:spr:svcbiz:v:9:y:2015:i:1:p:1-16. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

    or (Rebekah McClure)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.