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The Role of Fences in Oligopolistic Airline Markets

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  • Marco Alderighi

Abstract

In this paper we simulate carriers' capacity allocation practices in order to investigate the role of fences and forecasting for maintaining high load factor levels and returns in oligopolistic airline markets. We analyse the case where firms apply a well-established revenue management heuristic, called the expected marginal seat revenue rule, extending the original set-up provided by Belobaba (1989) to account for different levels of forecasting, segmentation, and passenger participation. Substantial differences in terms of revenue and load factor emerge and a key role is played by fences. © 2010 LSE and the University of Bath

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  • Marco Alderighi, 2010. "The Role of Fences in Oligopolistic Airline Markets," Journal of Transport Economics and Policy, University of Bath, vol. 44(2), pages 189-206, May.
  • Handle: RePEc:tpe:jtecpo:v:44:y:2010:i:2:p:189-206
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    Cited by:

    1. Diego Escobari & Jim Lee, 2014. "Demand uncertainty and capacity utilization in airlines," Empirical Economics, Springer, vol. 47(1), pages 1-19, August.
    2. Alderighi, Marco & Cento, Alessandro & Piga, Claudio A., 2011. "A case study of pricing strategies in European airline markets: The London – Amsterdam route," Journal of Air Transport Management, Elsevier, vol. 17(6), pages 369-373.
    3. Marco Alderighi & Alessandro Cento & Peter Nijkamp & Piet Rietveld, 2011. "Second-degree Price Discrimination and Inter-group Effects in Airline Routes between European Cities," Tinbergen Institute Discussion Papers 11-118/3, Tinbergen Institute.

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