Rivalry in the U.S. Airline Industry

Philippe Barla

Cahiers de recherche from Université Laval - Département d'économique

Abstract: In this paper, we use Market Share Instability (MSI) as a measure of the intensity of competition among airlines on a specific route. This measure is used to capture not only price competition but also non-price competition notably capacity competition. We test the effect of different variables (used in pricing studies) on MSI on a sample of 400 routes over the period 1987 to 1993. Most of the results found in pricing studies are confirmed using this measure of rivalry. For example the presence of a bankrupt carrier increases rivalry but extensive multimarket contact between rivals decreases competition. We also find that MSI was significantly lower in the early nineties when demand conditions were weak. A decline in the intensity of capacity competition could explain that result.

Date: 1996
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Working Paper: Rivalry in the U.S. Airline Industry (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:9603

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