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Potential Competition in the Deregulated Airlines


  • Strassmann, Diana L


Using a new and unique data set, this paper applies a systems approach to the study of potential competition, prices, and entry relations in airline city-pair markets. Consistent with limit pricing models, future entry is directly influenced by current prices. Current prices thus appear to provide an important signal to potential entrants about the probability of profitable entry. While results indicate the existence of barriers to entry, these barriers appear to have no independent effects on price beyond there effect on actual competition through increases in concentration. Copyright 1990 by MIT Press.

Suggested Citation

  • Strassmann, Diana L, 1990. "Potential Competition in the Deregulated Airlines," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 696-702, November.
  • Handle: RePEc:tpr:restat:v:72:y:1990:i:4:p:696-702

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    Cited by:

    1. Dobruszkes, Frédéric, 2009. "Does liberalisation of air transport imply increasing competition? Lessons from the European case," Transport Policy, Elsevier, vol. 16(1), pages 29-39, January.
    2. Bahram Adrangi & Garland Chow & Kambiz Raffiee, 1999. "The Effects of Market Structure and Technology on Airline Fleet Composition after Deregulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(1), pages 77-88, August.
    3. Ko, Young Dae, 2016. "An airline's management strategies in a competitive air transport market," Journal of Air Transport Management, Elsevier, vol. 50(C), pages 53-61.
    4. Michael Keen & Jon Strand, 2007. "Indirect Taxes on International Aviation," Fiscal Studies, Institute for Fiscal Studies, vol. 28(1), pages 1-41, March.
    5. Homsombat, Winai & Lei, Zheng & Fu, Xiaowen, 2014. "Competitive effects of the airlines-within-airlines strategy – Pricing and route entry patterns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 1-16.
    6. Abate, Megersa, 2016. "Economic effects of air transport market liberalization in Africa," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 326-337.
    7. Yahua Zhang & David Round, 2009. "Policy Implications of the Effects of Concentration and Multimarket Contact in China’s Airline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 307-326, June.
    8. Rashmi Banga, 2005. "Role of Services in the Growth Process: A Survey," Indian Council for Research on International Economic Relations, New Delhi Working Papers 159, Indian Council for Research on International Economic Relations, New Delhi, India.
    9. Abate, Megersa, 2014. "Economic effects of air transport market liberalization in Africa," Working papers in Transport Economics 2014:23, CTS - Centre for Transport Studies Stockholm (KTH and VTI).

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