Airline Network Competition with New Brand Subsidiaries
Ming Hsin Lin
Journal of Transport Economics and Policy, 2015, vol. 49, issue 1, 58-78
This paper investigates airline network competition where two (identical) hub carriers aim to establish new subsidiaries offering differentiated non-stop services on their rim-routes. Each of them may retain a hub or shift to a mix (or point-to-point) network cooperating with its subsidiary. We find that each chooses a mix (hub) network when passengers' product differentiation is large (small). We also find that one carrier chooses a hub and the other chooses a mix network when the differentiation is intermediate. Our welfare analysis shows that each network pair competition worsens welfare compared with a monopoly hub or mix network. © 2015 LSE and the University of Bath
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