 Airport capacity and entry deterrence: Low cost versus full service airlinesJorge Valido, M. Pilar Socorro and Francesca Medda Economics of Transportation, 2020, vol. 22, issue C Abstract: We study entry deterrence in air transport markets with a full-service (FS) carrier (the incumbent) and a low-cost (LC) carrier (the potential entrant). We consider a vertically differentiated product model where airlines have different operating cost and different generalized prices so they compete in ticket prices and frequencies. Thus, more frequency allows airlines to increase ticket prices without losing demand. In this context, we show that the incumbent may increase the frequency offered in order to deter the LC carrier entry. We show that if the airport capacity is low enough the LC carrier entry can be easily blocked or deterred. However, if the airport capacity is sufficiently high, the LC carrier entry must be accommodated. Regulators should take these results into account in order to promote competition among airlines. Keywords: Low-cost carriers; Full-service carriers; Entry deterrence; Airport capacity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:22:y:2020:i:c:s2212012219300796 DOI: 10.1016/j.ecotra.2020.100165 Access Statistics for this article Economics of Transportation is currently edited by Mogens Fosgerau and Erik Verhoef More articles in Economics of Transportation from Elsevier |
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