Airline Competition and Network Structure
Ricardo Flores-Fillol ()
UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)
This paper characterizes the equilibria in airline networks and their welfare implications in an unregulated environment. Competing airlines may adopt either fully-connected (FC) or hub-and-spoke (HS) network structures; and passengers exhibiting low brand loyalty to their preferred carrier choose an outside option to travel so that markets are partially served by airlines. In this context, carriers adopt hubbing strategies when costs are sufficiently low, and asymmetric equilibria where one carrier chooses a FC strategy and the other chooses a HS strategy may arise. Quite interestingly, flight frequency can become excessive under HS network configurations.
Keywords: fully-connected networks; hub-and-spoke networks; brand loyalty; fully-served markets; partially-served markets (search for similar items in EconPapers)
JEL-codes: L13 L2 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-mic and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:683.07
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