Modelling Airline Competition in Passenger Air Transport Markets – A Game-Theoretic Approach

In this paper, the author will present an approach to model airline competition. The purpose of this paper is to present a quantitative model of passenger air transport markets. Passenger air transport demand is not a fixed model-exogenous input parameter but is determined by model-endogenously and therefore depends among other factors on the supply of flights and their various characteristics. Competitive relationships between airlines are modeled within a game-theoretic framework. The model assumes that airlines have incomplete information about the characteristics of each other (e.g. high-cost vs. low-cost airline). Individual beliefs about the nature of different competitors are adjusted by a dynamic learning process over time. One of the central objectives of the model is to explain the dynamic developments of air transport markets and their competitive forces. Some interesting questions to examine include an analysis of entry deterrence strategies of incumbent carriers and market entry strategies of new carriers. In this context, incomplete information plays a critical role with regard to the profitability of such strategies and thus influences market developments. The model presented in this paper is of interest especially with regard to the evaluation of business strategies on the part of airlines and for public institutions that wish to analyze various market scenarios and evaluate political-economic actions.

Language

  • English

Media Info

  • Media Type: Digital/other
  • Features: Figures; References;
  • Pagination: 16p
  • Monograph Title: European Transport Conference, 2010 Proceedings

Subject/Index Terms

Filing Info

  • Accession Number: 01353936
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Oct 5 2011 11:25AM