Assessing predation in airline markets with low-fare competition

Thomas Gorin and Peter Belobaba

Transportation Research Part A: Policy and Practice, 2008, vol. 42, issue 5, 784-798

Abstract: Assessment of unfair competitive practices in airline markets has traditionally been based on the analysis of changes in average fares, revenue and traffic following low-fare entry. This paper demonstrates the severe limitations of using such measures. In particular, our case studies show that despite very different perceptions by some analysts of apparent incumbent carrier response to entry, average fares, revenues and traffic measures showed very similar patterns of change. We then use a competitive airline market simulation to illustrate the importance of often ignored factors - revenue management and the flows of connecting network passengers on the flight legs affected by low-fare entry - in explaining the effects of entry on these aggregate measures of airline performance. These simulation results further reinforce the danger in using such measures as indicators of predatory behavior in airline markets.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0965-8564(08)00031-1
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: https://EconPapers.repec.org/RePEc:eee:transa:v:42:y:2008:i:5:p:784-798

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Transportation Research Part A: Policy and Practice is currently edited by John (J.M.) Rose

More articles in Transportation Research Part A: Policy and Practice from Elsevier
Bibliographic data for series maintained by Catherine Liu ().