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Modelling strategic alliances in the wide-body long-range aircraft market

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  • Berrittella, Maria
  • Franca, Luigi La
  • Mandina, Vito
  • Zito, Pietro

Abstract

The wide-body long-range aircrafts market is characterized by increasing rivalry between Airbus and Boeing. One of the factors that drive their strategic behaviour is technological. We propose a technology indicator to identify conditions under which the aircraft companies have incentives to join a coalition. For this, we provide measurement of the side-payments necessary to sign a strategic alliance aimed at reducing technological barriers in the market. The results suggest that the existence of side-payments guarantees the stability of a strategic alliance if the gap in the technological level between the firms is high, or competition is through prices. For monopoly, a strategic alliance is profitable, but never stable.

Suggested Citation

  • Berrittella, Maria & Franca, Luigi La & Mandina, Vito & Zito, Pietro, 2007. "Modelling strategic alliances in the wide-body long-range aircraft market," Journal of Air Transport Management, Elsevier, vol. 13(3), pages 139-148.
    • Handle: RePEc:eee:jaitra:v:13:y:2007:i:3:p:139-148
    DOI: 10.1016/j.jairtraman.2007.01.003
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    References listed on IDEAS

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    4. Nina Pavcnik, 2002. "Trade Disputes in the Commercial Aircraft Industry," The World Economy, Wiley Blackwell, vol. 25(5), pages 733-751, May.
    5. Philip K. Verleger Jr., 1972. "Models of the Demand for Air Transportation," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 437-457, Autumn.
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