Price Competition and Inefficiency of Free Network Formation in the Airline Market

The analyses presented herein use the undercut-proof equilibrium, a new equilibrium concept for price competition with product differentiation, to illustrate whether it is socially optimal for an airline to form a network freely. The results show that an excessive network is formed if the differences, in terms of distance, between two airlines are small. If the differences are moderate, an excessive network is formed depending on the set-up costs and the number of passengers. For large differences, an excessive network is formed based on the set-up costs.

• Record URL:
  • http://www.sciencedirect.com/science/article/B6VHF-4K7NHW2-1/2/c26f5ba29cf8da2c9b1141a7d41c0bfa
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/13665545
• Supplemental Notes:
  • Abstract reprinted with permission from Elsevier
• Authors:
  • Kawasaki, Akio
• Publication Date: 2007-9

Language

• English

Media Info

• Media Type: Print
• Features: Appendices; Figures; References; Tables;
• Pagination: pp 479-494
• Serial:
  • Transportation Research Part E: Logistics and Transportation Review
  • Volume: 43
  • Issue Number: 5
  • Publisher: Elsevier
  • ISSN: 1366-5545
  • Serial URL: http://www.sciencedirect.com/science/journal/13665545

Subject/Index Terms

• TRT Terms: Airlines; Branding; Capital costs; Competition; Equilibrium (Economics); Markets; Networks; Operating costs; Passengers; Prices
• Subject Areas: Aviation; Finance; Passenger Transportation;

Filing Info

• Accession Number: 01055963
• Record Type: Publication
• Files: TRIS
• Created Date: Aug 29 2007 7:56AM