An empirical analysis of airline market concentration

This project was conceived as an extensive empirical analysis of the U.S. domestic airline market, to address the question of why there are so many routes operated by few carriers (e.g. under monopoly or duopoly conditions). Questions about market concentration, entry deterrence and reputation arose later. In particular, we focused on the number of carriers serving a route, their market power and the different levels of competition on a route. The main data source was the Department of Transport's DB1B origin-and-destination database, which contains a 10% random sample of all tickets sold for domestic travel in the U.S. since 1993. The two main tools used in our research have been qualitative (microeconomic) analysis and quantitative (econometric) modelling. Statistical models have been developed in an attempt to explain the main variables of interest as a function of explanatory factors, using the EViews econometric software. Among other results, we have observed considerable stability on the routes over time, as well as a higher probability of presence of a dominant carrier on a route as the route population increases.