Product specification under a threat of entry: Evidence from Airlines’ departure times

I examine how incumbent airlines adjust their departure times in response to the threat of entry by Southwest Airlines. I find that incumbents space their flights more evenly throughout the day when faced with potential entry. This reaction depends strongly on the level of the incumbent’s market share and hub status at the endpoint airports of a market. The evidence suggests that incumbents’ actions are designed to deter, rather than accommodate, entry. I do not find effects on flight frequency, suggesting that incumbents may rely more on the strategic choice of product attributes than on product proliferation to deter entry.