Economics at your fingertips  

Airport capacity and entry deterrence: Low cost versus full service airlines

Jorge 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)
JEL-codes: L12 L15 L93 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

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
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-06-30
Handle: RePEc:eee:ecotra:v:22:y:2020:i:c:s2212012219300796