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A Cournot model for analysing the effects of an open skies agreement

Vera Alves () and Rosa Forte ()
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Vera Alves: Universidade do Porto

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In the last decades there has been a gradual liberalisation of international air transport markets through the implementation of open skies agreements which seek the deregulation of the air transport industry and consequently the functioning of the market in a freer way. The objective of this work is to study the effects of an open skies agreement in order to understand if the airlines and the consumers will benefit after the market deregulation. With this purpose, we developed a Cournot model to compare the initial situation (without agreement) and the situation after the implementation of the open skies agreement. Based on the model developed it can be concluded that the prices on international market segments where competition increases should decline after market liberalisation, thus benefiting consumers. Regarding the incumbent airlines in the market, an open skies agreement should jeopardize the airlines that fail to operate new routes after the agreement, leading to decreased profits.

Keywords: Open Skies agreement; Cournot model; Effects on prices; Firms’ profits. (search for similar items in EconPapers)
JEL-codes: D43 D21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
Date: 2013-06
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Journal Article: A Cournot model for analysing the effects of an open skies agreement (2015) Downloads
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