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Competition in European Aviation: Pricing Policy and Market Structure

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  • Marin, Pedro L

Abstract

The purpose of this paper is to analyze the impact of liberal bilateral agreements on some European air routes in terms of price competition and market structure. The author proposes a model that explains firms' behavior and shows that, after the liberalization, firms exploit their cost advantages and differentiate their products more but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers. These results differ from American evidence in that the author finds that the effect of airport presence on prices through lower costs more than offsets the effect through higher perceived quality. Copyright 1995 by Blackwell Publishing Ltd.

Suggested Citation

  • Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 141-159, June.
    • Handle: RePEc:bla:jindec:v:43:y:1995:i:2:p:141-59
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    Cited by:

    1. Chen, Ruowei & Lei, Zheng, 2017. "Airport dominance and airline pricing power: An investigation of hub premiums in the Chinese domestic market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 509-524.
    2. Moreno-Izquierdo, L. & Ramón-Rodríguez, A. & Perles Ribes, J., 2015. "The impact of the internet on the pricing strategies of the European low cost airlines," European Journal of Operational Research, Elsevier, vol. 246(2), pages 651-660.
    3. Carlsson, Fredrik, 2002. "Price and Frequency Choice under Monopoly and Competition in Aviation Markets," Working Papers in Economics 71, University of Gothenburg, Department of Economics.
    4. Pedro L Marin, 1995. "The Remains of Regulation: Airlines Profits After Liberalization," STICERD - Economics of Industry Papers 12, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    5. Ruiz-Moreno, Felipe & Mas-Ruiz, Francisco J. & Sancho-Esper, Franco M., 2021. "Strategic groups and product differentiation: Evidence from the Spanish airline market deregulation," Research in Transportation Economics, Elsevier, vol. 90(C).
    6. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2010. "Scheduled service versus personal transportation: The role of distance," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 60-72, January.
    7. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research.
    8. Xavier Fageda Sanjuan, 2004. "Measuring Conduct and Cost Parameters in the Spanish Air Transport Market," Working Papers in Economics 125, Universitat de Barcelona. Espai de Recerca en Economia.
    9. Volodymyr Bilotkach & Vivek Pai, 2016. "Hubs versus Airport Dominance," Transportation Science, INFORMS, vol. 50(1), pages 166-179, February.
    10. Squalli, Jay, 2014. "Airline passenger traffic openness and the performance of Emirates Airline," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 138-145.
    11. Manuela, Wilfred Jr., 2007. "Airline liberalization effects on fare: The case of the Philippines," Journal of Business Research, Elsevier, vol. 60(2), pages 161-167, February.
    12. Marín Uribe, Pedro Luis & Gagnepain, Philippe, 2005. "Alliances in the Air: Some Worldwide Evidence," CEPR Discussion Papers 5063, C.E.P.R. Discussion Papers.
    13. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(4), pages 379-399, June.
    14. Gundelfinger-Casar, Javier & Coto-Millán, Pablo, 2018. "Measuring the main determinants of tourism flows to the Canary Islands from mainland Spain," Journal of Air Transport Management, Elsevier, vol. 70(C), pages 83-90.
    15. Njoya, Eric Tchouamou & Christidis, Panayiotis & Nikitas, Alexandros, 2018. "Understanding the impact of liberalisation in the EU-Africa aviation market," Journal of Transport Geography, Elsevier, vol. 71(C), pages 161-171.
    16. Gagnepain, Philippe & Marin, Pedro L, 2006. "Regulation and Incentives in European Aviation," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 229-248, April.
    17. Bernardo, Valeria & Fageda, Xavier, 2017. "The effects of the Morocco-European Union open skies agreement: A difference-in-differences analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 24-41.
    18. Volodymyr Bilotkach, 2007. "Asymmetric Regulation and Airport Dominance in International Aviation: Evidence from the London‐New York Market," Southern Economic Journal, John Wiley & Sons, vol. 74(2), pages 505-523, October.
    19. Abate, Megersa, 2016. "Economic effects of air transport market liberalization in Africa," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 326-337.
    20. Oliveira, Alessandro V.M, 2003. "The Impacts Of Liberalisation On A Brazilian Air Shuttle Market," The Warwick Economics Research Paper Series (TWERPS) 676, University of Warwick, Department of Economics.
    21. Gundelfinger, Javier & Coto-Millán, Pablo, 2020. "Price and demand behaviors in the Scandinavian airline industry following market liberalization," Utilities Policy, Elsevier, vol. 64(C).

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