The contestibility of airline market

D. Seliverstov ()

Journal of Modern Competition, 2016, vol. 10, issue 6, 36-48

Abstract: The airline industry is usually given as an example to prove the contestability theory in academic research. It is widely accepted that the carriers can with almost no cost enter new markets with the available aircraft. But does the contestability really apply to the industry?The article is aimed at analyzing the principal conditions of the contestability with regard to the U. S. airline industry, including the role of potential and real competition, the aspects of entry barriers and sunk costs. On the basis of the previous studies and research conducted in this article the author made a conclusion that the airline industry can be characterized as a weak form of the contestable market. It is explained by significant entry barriers and stronger real competition influence on the behavior of the airline market actors. At the same time the article points out an important role of the competing airline type when analyzing market structure. It was found out that the participation of low cost carriers contributes a lot to creating competitive environment. The results of the article are of value for analyzing and planning the antitrust policy of the airline market, including the Russian market.

Keywords: airline market; entry barriers; sunk costs; potential competition; market structure (search for similar items in EconPapers)
Date: 2016
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