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A Cournot model for analysing the effects of an open skies agreement


  • Vera Alves

    () (Universidade do Porto)

  • Rosa Forte

    () (Faculdade de Economia, Universidade do Porto, and cef.up)


In the last decades there has been a gradual liberalisation of international air transport markets through the implementation of open skies agreements which seek the deregulation of the air transport industry and consequently the functioning of the market in a freer way. The objective of this work is to study the effects of an open skies agreement in order to understand if the airlines and the consumers will benefit after the market deregulation. With this purpose, we developed a Cournot model to compare the initial situation (without agreement) and the situation after the implementation of the open skies agreement. Based on the model developed it can be concluded that the prices on international market segments where competition increases should decline after market liberalisation, thus benefiting consumers. Regarding the incumbent airlines in the market, an open skies agreement should jeopardize the airlines that fail to operate new routes after the agreement, leading to decreased profits.

Suggested Citation

  • Vera Alves & Rosa Forte, 2013. "A Cournot model for analysing the effects of an open skies agreement," CEF.UP Working Papers 1311, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:cetedp:1311

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    References listed on IDEAS

    1. Adler, Nicole & Hashai, Niron, 2005. "Effect of open skies in the Middle East region," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(10), pages 878-894, December.
    2. Aguirregabiria, Victor & Ho, Chun-Yu, 2010. "A dynamic game of airline network competition: Hub-and-spoke networks and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 377-382, July.
    3. 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.
    4. Pels, Eric, 2009. "Network competition in the open aviation area," Journal of Air Transport Management, Elsevier, vol. 15(2), pages 83-89.
    5. Button, Kenneth, 2009. "The impact of US–EU “Open Skies†agreement on airline market structures and airline networks," Journal of Air Transport Management, Elsevier, vol. 15(2), pages 59-71.
    6. Pitfield, D.E., 2009. "The assessment of the EU–US Open Skies Agreement: The counterfactual and other difficulties," Journal of Air Transport Management, Elsevier, vol. 15(6), pages 308-314.
    7. Cosmas, Alex & Belobaba, Peter & Swelbar, William, 2010. "The effects of open skies agreements on transatlantic air service levels," Journal of Air Transport Management, Elsevier, vol. 16(4), pages 222-225.
    8. Oum, Tae Hoon & Yu, Chunyan, 1995. "A productivity comparison of the world's major airlines," Journal of Air Transport Management, Elsevier, vol. 2(3), pages 181-195.
    9. Bilotkach, Volodymyr, 2007. "Complementary versus semi-complementary airline partnerships," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 381-393, May.
    10. Barbot, Cristina, 2004. "Economic effects of re-allocating airports slots: a vertical differentiation approach," Journal of Air Transport Management, Elsevier, vol. 10(5), pages 333-343.
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    Cited by:

    1. repec:ris:jspord:0951 is not listed on IDEAS
    2. Chao, Ching-Cheng & Li, Ru-Guo, 2017. "Effects of cargo types and load efficiency on airline cargo revenues," Journal of Air Transport Management, Elsevier, vol. 61(C), pages 26-33.

    More about this item


    Open Skies agreement; Cournot model; Effects on prices; Firms’ profits.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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