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Analyzing competition for hub location in intercontinental aviation markets

Author

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  • Martín, Juan Carlos
  • Román, Concepción

Abstract

This paper develops a game theoretic model that analyzes the competition for hub location when airlines operate in deregulated intercontinental markets. The whole process is viewed as a dynamic game of complete information played in two stages: location and competition. In the location stage, airlines decide the location of the hub after having observed the location of previous entrants. In the competition stage, airlines compete for market share taking into consideration all the possible outcomes in the location stage. Results of the model are applied to intercontinental routes between South-America and Europe in the case of duopoly. Eight different equilibrium outcomes are obtained in terms of the parameters of the model. Some of the solutions obtained highlight the dynamical nature of the location process as well as the relative importance of central location and local traffic at each airport in order to select a hub in this market.

Suggested Citation

  • Martín, Juan Carlos & Román, Concepción, 2004. "Analyzing competition for hub location in intercontinental aviation markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(2), pages 135-150, March.
    • Handle: RePEc:eee:transe:v:40:y:2004:i:2:p:135-150
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    Citations

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    Cited by:

    1. Juan Martín & Augusto Voltes-Dorta, 2008. "Theoretical Evidence of Existing Pitfalls in Measuring Hubbing Practices in Airline Networks," Networks and Spatial Economics, Springer, vol. 8(2), pages 161-181, September.
    2. Caicedo, Felix & Diaz, Alejandra, 2013. "Case analysis of simultaneous concessions of parking meters and underground parking facilities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 358-378.
    3. Takebayashi, Mikio, 2015. "Multiple hub network and high-speed railway: Connectivity, gateway, and airport leakage," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 55-64.
    4. Nader Azizi & Navneet Vidyarthi & Satyaveer S. Chauhan, 2018. "Modelling and analysis of hub-and-spoke networks under stochastic demand and congestion," Annals of Operations Research, Springer, vol. 264(1), pages 1-40, May.
    5. Akio Kawasaki, 2012. "Hub location with scheduling effects in a monopoly airline market," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(3), pages 805-819, December.
    6. O’Connor, Kevin & Fuellhart, Kurt, 2015. "The fortunes of air transport gateways," Journal of Transport Geography, Elsevier, vol. 46(C), pages 164-172.

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