On the Choice between Strategic Alliance and Merger in the Airline Sector: the Role of Strategic Effects
We consider a market with three competitors, two of which decide to cooperate. Firms first choose capacity under demand uncertainty then compete in quantities after the uncertainty has been resolved. We specify strategic alliance (SA) as an agreement where two airlines jointly choose capacity and divide it among themselves. Contrary to the full merger case, after demand is revealed the alliance members market their capacity shares independently. Our main result is that the profit of the cooperating firms is greater under SA than under full merger.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: Pavillon J.A. De Sève, Québec, Québec, G1K 7P4|
Phone: (418) 656-5122
Fax: (418) 656-2707
Web page: http://www.ecn.ulaval.ca
More information through EDIRC
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.:
- Chen, Zhiqi & Ross, Thomas W., 2003. "Cooperating upstream while competing downstream: a theory of input joint ventures," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 381-397, March.
- Lin, Ming Hsin, 2004. "Strategic airline alliances and endogenous Stackelberg equilibria," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(5), pages 357-384, September.
- Morasch, Karl, 2000. "Strategic alliances as Stackelberg cartels - concept and equilibrium alliance structure," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 257-282, February.
- repec:ebl:ecbull:v:12:y:2005:i:4:p:1-11 is not listed on IDEAS
- 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.
- Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
- Barla, Philippe & Constantatos, Christos, 2005. "Strategic interactions and airline network morphology under demand uncertainty," European Economic Review, Elsevier, vol. 49(3), pages 703-716, April.
- 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.
When requesting a correction, please mention this item's handle: RePEc:lvl:laeccr:0502. 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: (Manuel Paradis)
If references are entirely missing, you can add them using this form.