COMPETITIVE RESPONSES TO LOW COST CARRIER ENTRY

Recent research has found that the entrance of a low cost carrier leads to lower prices on routes it has entered. This paper extends this analysis by examining the impact of route entry by a discount carrier, ValuJet into an established carrier's hub, Delta, and by examining price changes on routes not entered by the low cost carrier. It was found that Delta lowered its fares on competitive routes terminating in Atlanta and on routes flowing through its Atlanta hub in response to competition by ValuJet. The authors did not find evidence that Delta increased fares on non-competitive routes (either those terminating in Atlanta or flowing through Atlanta) to compensate for lost revenues on the competitive routes. This final result runs counter to the conjectures of the DOT and supports the argument that firms practice rational economic pricing in their hub-and-spoke networks.

  • Availability:
  • Corporate Authors:

    Elsevier

    The Boulevard, Langford Lane
    Kidlington, Oxford  United Kingdom  OX5 1GB
  • Authors:
    • Windle, R
    • Dresner, M
  • Publication Date: 1999-3

Language

  • English

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 00762264
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Apr 12 1999 12:00AM