Demand Uncertainty and Airline Network Morphology with Strategic Interactions

Philippe Barla

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

In this paper, we examine how strategic interactions affect airline network. We develop a three stage duopoly game: at stage 1 airlines determines their network structure (linear versus hub-and-spoke). At stage 2 they decide on their capacities, and at stage 3 firms compete in quantities. The main feature of the model is that firms have to decide on network structure and capacities while facing demand uncertainty. We show that while hubbing is efficient, airlines may choose a linear network for strategic reasons. Furthermore, we show that this structure softens competition by preventing contagion of competition across markets.

Keywords: Airlines; Competition; Capacity constraints; Network; Uncertainty (search for similar items in EconPapers)
JEL-codes: L13 L93 (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Demand Uncertainty and Airline Network Morphology with Strategic Interactions (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:9907

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