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Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency

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  • Jan K. Brueckner
  • Dan Luo

Abstract

This paper investigates strategic interaction among airlines in product-quality choices. Using an instrumental variables approach, the paper estimates flight-frequency reaction functions, which relate an airline’s frequency on a route to its own characteristics and to the frequencies of competing airlines. A positive reaction function slope is found in some cases, indicating the presence of strategic interaction in the choice of frequencies. The paper also asks whether multimarket contact generates mutual forbearance in frequency competition, finding no evidence for such an effect.

Suggested Citation

  • Jan K. Brueckner & Dan Luo, 2013. "Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency," CESifo Working Paper Series 4066, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4066
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    Citations

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    Cited by:

    1. Gayle Philip G. & Thomas Tyson, 2015. "Product Quality Effects of International Airline Alliances, Antitrust Immunity, and Domestic Mergers," Review of Network Economics, De Gruyter, vol. 14(1), pages 45-74, March.
    2. repec:eee:retrec:v:66:y:2017:i:c:p:12-25 is not listed on IDEAS
    3. repec:eee:transb:v:104:y:2017:i:c:p:483-500 is not listed on IDEAS
    4. repec:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-016-9544-x is not listed on IDEAS
    5. Fageda, Xavier, 2014. "What hurts the dominant airlines at hub airports?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 177-189.
    6. Greenfield, Daniel, 2014. "Competition and service quality: New evidence from the airline industry," Economics of Transportation, Elsevier, vol. 3(1), pages 80-89.
    7. Lijesen, Mark & Behrens, Christiaan, 2017. "The spatial scope of airline competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 99(C), pages 1-13.

    More about this item

    Keywords

    airlines; reaction function; product quality; flight frequency;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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