CONCENTRATION, ENTRY, AND POTENTIAL ENTRY: THE IMPACT OF SOUTHWEST AIRLINES ON THE U.S. AIRLINE INDUSTRY

Many empirical papers on the U.S. airline industry have been written in the 15 years since deregulation. One of the most important issues has been the impact of new entry, potential entry, and concentration on prices. The traditional structure-conduct-performance paradigm from industrial organization economics argues that changes in market structure, including new entry, will have a major influence on firm conduct (e.g., pricing decisions) and market performance (e.g., profitability). However, some economists have argued that the airline industry is contestable because potential entry restrains firms from charging fares greater than marginal costs, and accordingly new entry would have little effect on prices. By investigating the effects of competition and the presence of Southwest Airlines on the performance of the domestic market, this paper contributes to the debate on the impact of concentration and actual/potential entry on prices as well as how consumers would benefit from it.

Language

  • English

Media Info

  • Pagination: p. 591-607

Subject/Index Terms

Filing Info

  • Accession Number: 00726852
  • Record Type: Publication
  • Report/Paper Numbers: Volume 2
  • Files: TRIS
  • Created Date: Oct 17 1996 12:00AM