Incumbents’ pricing and nonpricing responses to entry in vertically differentiated markets

Christoph Bauner and Zexuan Liu

Journal of Air Transport Management, 2022, vol. 105, issue C

Abstract: We investigate incumbents’ pricing and nonpricing responses to product entry in market with vertical product differentiation. Using data from international airline markets, we observe price reductions by connecting incumbents in response to high-quality (nonstop) entry. We also find evidence of product repositioning (increases in total itinerary distance) by connecting incumbents. However, we do not observe significant policy changes by incumbents offering nonstop flights. Additional evidence suggests that the reason for the response by connecting incumbents is the opportunity cost of connecting at desirable airports such as airline hubs.

Keywords: Entry response; Nonstop entry; International airline markets (search for similar items in EconPapers)
JEL-codes: L10 L93 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:105:y:2022:i:c:s0969699722000989

DOI: 10.1016/j.jairtraman.2022.102279

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