IDEAS home Printed from https://ideas.repec.org/p/iuk/wpaper/2010-15.html
   My bibliography  Save this paper

Do Incumbents Improve Service Quality in Response to Entry? Evidence from Airlines’ On-Time Performance

Author

Listed:
  • Jeffrey T. Prince

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Daniel H. Simon

    (School of Public and Economic Affairs, Indiana University)

Abstract

We examine if and how incumbent firms respond to entry, and entry threats, using non-price modes of competition. Our analysis focuses on service quality within the airline industry. We find that incumbent on-time performance actually worsens in response to entry, and even entry threats, by Southwest Airlines. Given Southwest’s general superiority in on-time performance, this result is consistent with equilibria of theoretical models of quality and price competition, which generally predict differentiation along quality. We corroborate this intuition with further analysis, showing there is no notable response by incumbents when an airline with average on-time performance (Continental) threatens to enter or enters a route.

Suggested Citation

  • Jeffrey T. Prince & Daniel H. Simon, 2010. "Do Incumbents Improve Service Quality in Response to Entry? Evidence from Airlines’ On-Time Performance," Working Papers 2010-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  • Handle: RePEc:iuk:wpaper:2010-15
    as

    Download full text from publisher

    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2010-15-prince-simon.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ben-Akiva, Moshe & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Spatial competition with differentiated products," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 5-19, February.
    2. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen, Yongmin & Gayle, Philip, 2013. "Mergers and Product Quality: Evidence from the Airline Industry," MPRA Paper 51238, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iuk:wpaper:2010-15. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rick Harbaugh). General contact details of provider: http://edirc.repec.org/data/dpiubus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.