Network Structure and Entry, in the Deregulated Airline Industry

Joseph Berechman, Sougata Poddar () and Oz Shy
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Joseph Berechman: Tel Aviv University

No 1997-10, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: We explore how an incumbent airline firm structures its route network under the threat of entry caused by deregulation. We show that entry induces the incumbent firm to strategically alter its flight operating network from a fully connected network (FC) to a hub-and-spoke network (HS). While most of the literature always assumed that the use of a HS network is primarily for the purpose of cost reduction, we show that hub-and-spoke operation can be used as a strategic device by the incumbent firm when it faces a threat of entry in its operating zone.

Keywords: airline deregulation; hub-and-spoke; networks; entry (search for similar items in EconPapers)
JEL-codes: L51 L93 (search for similar items in EconPapers)
Pages: 16 pages
Date: 1997-05
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Published in: Keio Economic Studies. 1998; 35(2): 71-82

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Working Paper: Network Structure and Entry in the Deregulated Airline Industry (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieci:1997-10

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