Market power and its determinants in the Chinese airline industry

Qiong Zhang, Hangjun Yang, Qiang Wang and Anming Zhang

Transportation Research Part A: Policy and Practice, 2014, vol. 64, issue C, 1-13

Abstract: This paper first measures the degree of Chinese airlines’ market power by using Lerner index, and then investigates its determinants. Our empirical results show that a certain degree of market power exists in the Chinese airline industry. Of the three dominant carriers, Air China exhibits the strongest market power whereas China Eastern Airlines the weakest, with China Southern Airlines being in the middle. Furthermore, the extent of market power varies significantly among regional markets, with China’s northeast region as the strongest, followed by the eastern and western regions, and the central area as the weakest. We also find a hub-premium effect similar to the result found in the US airline market. Our analysis shows that the existence of high-speed rail and low-cost carriers, income level, population size, seasonality, and number of competing airlines are the main determinants of competition in the Chinese airline market.

Keywords: Market power; Chinese airline industry; Lerner index; Market-power determinants (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (64)

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DOI: 10.1016/j.tra.2014.03.003

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