Exploring Network Effects of Point-to-Point Networks: An Investigation of the Spatial Entry Patterns of Southwest Airlines

Jia Yan, Xiaowen Fu and Tae Oum (jiay@wsu.edu)
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Tae Oum: School of Economic Sciences, Washington State University

No 2008-21, Working Papers from School of Economic Sciences, Washington State University

Abstract: This paper explores network effects in Point-to-Point airline networks by examining the spatial entry patterns of Southwest airlines during the 1990-2006 period. Estimation results from a spatial probit model reveal clear spatial dependence in profitability across different routes served by the carrier. Detailed investigation suggests two main sources of network effects, namely: (1) airport and regional presence, and (2) substitutability of markets. Findings of the paper suggest also that the network effects embedded in Southwest’s Point-to-Point network have many distinguishing features as compared to those identified in a typical Hub-and-Spoke network. This study brings some fresh insights on airline network effects in general, as well as explaining the pattern of aggressive network expansions of LCCs in particular.

Keywords: Point-to-Point Networks; spatial entry patterns; Southwest airlines; spatial probit model (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-11
New Economics Papers: this item is included in nep-com, nep-geo, nep-net, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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