Potential Competition in the Deregulated Airlines

Diana Strassmann

The Review of Economics and Statistics, 1990, vol. 72, issue 4, 696-702

Abstract: Using a new and unique data set, this paper applies a systems approach to the study of potential competition, prices, and entry relations in airline city-pair markets. Consistent with limit pricing models, future entry is directly influenced by current prices. Current prices thus appear to provide an important signal to potential entrants about the probability of profitable entry. While results indicate the existence of barriers to entry, these barriers appear to have no independent effects on price beyond there effect on actual competition through increases in concentration. Copyright 1990 by MIT Press.

Date: 1990
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