Airline Economics

An Empirical Analysis of Market Structure and Competition in the US Airline Industry

verfasst von: Giovanni Alberto Tabacco

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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This book presents an original empirical investigation of the market structure of airline city pair markets, shedding new light on the workings of competitive processes between firms. Examining a cross-section of US airline city pairs, Tabacco proposes for the first time that the industry can be understood as a natural oligopoly, each airline market being dominated by one to three airline carriers regardless of market size. The author questions the extent to which airlines deliberately prevent head-to-head competition within city pair markets, and draws intriguing conclusions about competitive forces from the observed market structure. Uncovering some of the main corporate strategies of the airline industry, the book is of immediate relevance to industry managers and practitioners, as well as academic economists.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract

This chapter provides the main objectives, plan and results of the whole project, and also highlights the gap in the literature.

Giovanni Alberto Tabacco

2. Airline City Pair Markets as Natural Oligopolies

Abstract

Most of the industrial organization literature on airlines has neglected the competitive forces which have generated industrial market structure. This chapter, in contrast to previous work, shows the underlying competitive process in the airline industry inferred from the investigation of market structure. The empirical analysis is grounded on Shaked and Sutton (1983), who find evidence suggesting that the market structure of airline city pair markets is a natural oligopoly; indeed, from one to three firms count for the majority of market shares for each city pair market, irrespective of market size. In addition, estimates suggest evidence that rival’s airport presence reduces firm’s entry hence market concentration. Overall these results suggest that the small number of airline carriers dominate city pair markets for means of increasing airport presence.

Giovanni Alberto Tabacco

3. Market Size, Firm Numbers and Market Share Asymmetry

Abstract

This chapter deduces the nature of competition from an empirical analysis of firm numbers and market share asymmetry. Using a data set consisting of a cross-section sample of city pair markets, we extend the literature on market structure. In contrast to previous literature on empirical models of market structure and entry, here we study the determinants of size inequalities, which can reveal much about the competitive process that might be concealed when considering only the number of firms and a firm’s entry decision.

Giovanni Alberto Tabacco

4. Entry and Market-Sharing Agreements in the U.S. Airline Industry

Abstract

I attempt to assess collusion in terms of market-sharing agreements among airlines. To pursue this goal, I develop a sequential entry model estimating firm-specific entry functions, for a cross-section sample of 661 airline city pair markets. Entry decisions depend upon market characteristics and market structure (rival’s presence). In line with early literature (e.g. Berry, Econometrica 60: 889–917, 1992), results suggest evidence that firm i’s airport presence increases its likelihood of market entry, and hence the profitability of city pair markets. Furthermore, the empirical evidence appears partly consistent with the possibility of market sharing agreements.

Giovanni Alberto Tabacco

5. Conclusion

Abstract

In this chapter I briefly bring together the main results reached throughout this research monograph, and I indicate some potential fruitful areas for future research.

Giovanni Alberto Tabacco

Backmatter

Titel: Airline Economics
verfasst von: Giovanni Alberto Tabacco
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-46729-0
Print ISBN: 978-3-319-46728-3
DOI: https://doi.org/10.1007/978-3-319-46729-0

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Über dieses Buch

Inhaltsverzeichnis

Frontmatter

1. Introduction

2. Airline City Pair Markets as Natural Oligopolies

3. Market Size, Firm Numbers and Market Share Asymmetry

4. Entry and Market-Sharing Agreements in the U.S. Airline Industry

5. Conclusion

Backmatter

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