The effect of service quality and price on international airline competition

Rong-Chang Jou, Soi-Hoi Lam, David Hensher, Chih-Cheng Chen and Chung-Wei Kuo

Transportation Research Part E: Logistics and Transportation Review, 2008, vol. 44, issue 4, 580-592

Abstract: A game theoretic model, integrated with passenger's international choice behavior, for the competition between international airlines is developed and used to identify the role of competing service quality. The empirical evidence suggests that safety, convenience and service quality have a major influence on the choice decision of air passengers. Passengers respond strongly to decreases in price, increased safety, service comprehensiveness and increases in convenience. In a Cournot model, airlines are predicted to increase service quality, with China Airlines, a dominant carrier, the winner on safety and service quality. Foreign companies are beneficiaries in providing convenient service quality. In a Stakelberg model, all the airlines will increase safety and diversify service quality to a reference point. Foreign airlines will additionally be winners in safety and convenience, and China Airlines will be a winner in diversifying service quality. This research can be used to assist airline companies in identifying the role of quality of service in the aviation market as a whole, adding competitive advantage to their business.

Keywords: Service; quality; Reference; point; Asymmetric; response; model; Linear; structural; relations; model; Game; theory; Cournot; model; Stakelberg; model (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S136655450700052X
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:transe:v:44:y:2008:i:4:p:580-592

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/bibliographic
http://www.elsevier. ... 600244/bibliographic

Access Statistics for this article

Transportation Research Part E: Logistics and Transportation Review is currently edited by W. Talley

More articles in Transportation Research Part E: Logistics and Transportation Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().