Strategic Effects Of Airline Alliances
This paper looks at the endogenous formation of airline alliances bymeans of a two-stage game where first airlines decide whether to form analliance and then fares are determined. We analyze the profitability and thestrategic effects of airline alliances when two complementary alliances,following different paths, may be formed to serve a certain city-pair market.The formation of a complementary alliance is shown to hurt outsiders and thatfares decrease in the interline market. Contrary to what might be expected, wefind that complementary alliances are not always profitable, even in thepresence of economies of traffic density. The interplay between market size, thedegree of product differentiation and the intensity of economies of trafficdensity determines whether the market equilibrium entails no alliances, a singlealliance or a double alliance.
|Date of creation:||Jun 2006|
|Publication status:||Published by Ivie|
|Contact details of provider:|| Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA|
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page: http://www.ivie.es/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ken Hendricks & Michele Piccione & Guofu Tan, 1999.
"Equilibria in Networks,"
Econometric Society, vol. 67(6), pages 1407-1434, November.
- Hendricks, K. & Piccione, M. & Tan, G., 1997. "Equilibria in networks," Discussion Paper Series In Economics And Econometrics 9717, Economics Division, School of Social Sciences, University of Southampton.
- Jan K. Brueckner, 2004.
"Network Structure and Airline Scheduling,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(2), pages 291-312, 06.
- Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
- Park, Jong-Hun & Zhang, Anming, 1998. "Airline alliances and partner firms' outputs," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 34(4), pages 245-255, December.
- Tae Hoon Oum & Anming Zhang & Yimin Zhang, 1995. "Airline Network Rivalry," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 836-857, November.
- Sven-Olof Fridolfsson & Johan Stennek, 2001.
"Why Mergers Reduce Profits and Raise Share Prices: A Theory of Preemptive Mergers,"
CIG Working Papers
FS IV 01-26, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Sven-Olof Fridolfsson & Johan Stennek, 2005. "Why Mergers Reduce Profits And Raise Share Prices-A Theory Of Preemptive Mergers," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1083-1104, 09.
- FRIDOLFSSON, Sven-Olof & STENNEK, Johan, 1999. "Why mergers reduce profits, and raise share prices: A theory of preemptive mergers," Working Papers 1999018, University of Antwerp, Faculty of Applied Economics.
- Orit Hassin & Oz Shy, 2004. "Code-sharing Agreements and Interconnections in Markets for International Flights," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 337-352, 08.
- Barla, Philippe & Constantatos, Christos, 2000. "Airline network structure under demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(3), pages 173-180, September.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Volodymyr Bilotkach, 2005. "Price Competition between International Airline Alliances," Journal of Transport Economics and Policy, University of Bath, vol. 39(2), pages 167-190, May.
- Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
- Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
- Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
- Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-545, October.
- Creel, Michael & Farell, Montserrat, 2001. "Economies of scale in the US airline industry after deregulation: a Fourier series approximation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(5), pages 321-336, November.
- Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
- Park, Jong-Hun, 1997. "The effects of airline alliances on markets and economic welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(3), pages 181-195, September.
When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2006-06. 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: (Departamento de Edición)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.