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Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route

In: Empirical Studies of Strategic Trade Policy

Listed author(s):
  • Victor D. Norman
  • Siri Strandenes

The paper develops a numerical simulation model to assess the possible consequences of competition on inter-Scandinavian air routes, using the Oslo-Stockholm route as a case. In the model, demand for air transportation depends on the price and frequency, reflecting consumer preferences for travel and for time of departure. Initially, the market is taken to be an SAS monopoly, so the model is calibrated to estimates of prices and costs, data for demand, and to the first-order conditions for a monopolist. The model is then used to simulate symmetric, non-cooperative many-firm equilibria, described as a simultaneous Bertrand equilibrium in pricing and Cournot equilibrium in the number of flights offered. The simulation experiments indicate very substantial efficiency gains from competition.

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This chapter was published in:
  • Paul Krugman & Alasdair Smith, 1994. "Empirical Studies of Strategic Trade Policy," NBER Books, National Bureau of Economic Research, Inc, number krug94-1.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8677.
    Handle: RePEc:nbr:nberch:8677
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    1. Norman, Victor D., 1989. "Trade policy under imperfect competition Theoretical ambiguities -- empirical regularities?," European Economic Review, Elsevier, vol. 33(2-3), pages 473-479, March.
    2. Baldwin, R. & Flam, H., 1989. "Strategic Trade Policies In The Market For 30-40 Seat Consumer Aircraft," Papers 431, Stockholm - International Economic Studies.
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