Incumbent Response to Entry by Low‐Cost Carriers in the U.S. Airline Industry

Kerry M. Tan

Southern Economic Journal, 2016, vol. 82, issue 3, 874-892

Abstract: This article studies incumbent price response to entry by low‐cost carriers in the U.S. airline industry. I find that legacy carrier incumbents decrease their mean airfare, 10th percentile airfare, and 90th percentile airfare following entry by a low‐cost carrier. Airfares decrease by a larger percentage at the right tail of the incumbents’ price distribution than at the left tail, suggesting that increased competition from low‐cost carrier entrants leads to lower price dispersion.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:82:y:2016:i:3:p:874-892

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