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Some Speculations and Empirical Evidence on the Oligopolistic Behaviour of Competing Low-Cost Airlines

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  • D. E. Pitfield

Abstract

This paper reviews the theory of cost recovery and oligopoly with a view to advancing some judgements as to the way in which European low-cost airlines manage yield, depending upon the market morphology that applies. Routes with more than one operator in direct (at the same airport) competition or indirect (at an adjacent airport) competition will manage their yield in a manner that is traditional for their sector of the industry, but where this will be affected by the yield management process of the competitors. This paper draws on evidence of airline price setting when there is direct competition. It would seem that there is evidence of price leadership and more generally of a strong correlation between the fares of the differentiated product that the airlines offer in competition. © 2005 LSE and the University of Bath

Suggested Citation

  • D. E. Pitfield, 2005. "Some Speculations and Empirical Evidence on the Oligopolistic Behaviour of Competing Low-Cost Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 379-390, September.
  • Handle: RePEc:tpe:jtecpo:v:39:y:2005:i:3:p:379-390
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    1. Baer, Christopher T. & Klein, Daniel B. & Majewski, John, 1992. "From Trunk to Branch: Toll Roads in New York, 1800-1860," University of California Transportation Center, Working Papers qt9pv183b2, University of California Transportation Center.
    2. David M. Levinson, 2002. "Financing Transportation Networks," Books, Edward Elgar Publishing, number 2308, April.
    3. Fielding, Gordon J. & Klein, Daniel B., 1993. "How To Franchise Highways," University of California Transportation Center, Working Papers qt79z9x6fs, University of California Transportation Center.
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    Cited by:

    1. Hideki Murakami & Yoshihisa Amano, 2013. "Dynamic effect of inter-airline rivalry on airfares and consumers' welfare: Japan' s full-service vs. new air carriers," Discussion Papers 2013-31, Kobe University, Graduate School of Business Administration.
    2. Hideki Murakami, 2010. "Time Effect of Low-Cost Carrier Entry and Social Welfare in US Large Air Markets," Discussion Papers 2010-31, Kobe University, Graduate School of Business Administration.
    3. Pitfield, D.E. & Caves, R.E. & Quddus, M.A., 2010. "Airline strategies for aircraft size and airline frequency with changing demand and competition: A simultaneous-equations approach for traffic on the north Atlantic," Journal of Air Transport Management, Elsevier, vol. 16(3), pages 151-158.
    4. Enrico Bachis & Claudio A. Piga, 2006. "Hub Premium, Airport Dominance and Market Power in the European Airline Industry," Rivista di Politica Economica, SIPI Spa, vol. 96(5), pages 11-54, September.
    5. Claudio A. Piga & Enrico Bachis, 2006. "Pricing strategies by European traditional and low cost airlines. Or, when is it the best time to book on line?," Discussion Paper Series 2006_14, Department of Economics, Loughborough University, revised Jul 2006.
    6. Pitfield, D.E., 2008. "Some insights into competition between low-cost airlines," Research in Transportation Economics, Elsevier, vol. 24(1), pages 5-14.
    7. repec:eee:touman:v:31:y:2010:i:1:p:36-44 is not listed on IDEAS
    8. Moreno, Luis & Ramon, Ana & Pedreño, Andrés, 2015. "The Development of Low-cost Airlines and Tourism as a Competitiveness Complementor: Effects, Evolution and Strategies," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 3(4), pages 262-274.
    9. Murakami, Hideki & Amano, Yoshihisa & Asahi, Ryota, 2015. "Dynamic effect of inter-firm rivalry on airfares: Case of Japan's full-service and new air carriers," Journal of Air Transport Management, Elsevier, vol. 44, pages 25-33.
    10. Pitfield, D.E., 2009. "The assessment of the EU–US Open Skies Agreement: The counterfactual and other difficulties," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 308-314.

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