IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v47y2011i3p306-314.html
   My bibliography  Save this article

Time effect of low-cost carrier entry and social welfare in US large air markets

Author

Listed:
  • Murakami, Hideki

Abstract

In this study we empirically analyzed the airfare level at which most low-cost carriers (LCCs) entered the market, what impacts LCCs had on the airfares of incumbent carriers, whether the impacts differed depending on how many LCCs existed in a market and on whether LCC(s) entered a full-service carrier (FSC)'s hub airport or an adjacent airport, whether the low-airfare impact continued for the years following entry, and finally what are the welfare implication of LCCs' entries. We modeled and estimated the simultaneous demand and price (pseudo-supply) equation to derive these four economic impacts of LCCs' entries by using published data of 1998. Our main findings are that the impact of LCCs' entries did not differ between the entry year and the second year and the social welfare gains are substantial, and 90% of welfare gains come from the gain in consumers surplus.

Suggested Citation

  • Murakami, Hideki, 2011. "Time effect of low-cost carrier entry and social welfare in US large air markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(3), pages 306-314, May.
    • Handle: RePEc:eee:transe:v:47:y:2011:i:3:p:306-314
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554510001079
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mizutani, Jun & Sakai, Hiroki, 2021. "Which is a stronger competitor, High Speed Rail, or Low Cost Carrier, to Full Service Carrier? – Effects of HSR network extension and LCC entry on FSC's airfare in Japan," Journal of Air Transport Management, Elsevier, vol. 90(C).
    2. Yang, Chih-Wen, 2016. "Entry effect of low-cost carriers on airport-pairs demand model using market concentration approach," Journal of Air Transport Management, Elsevier, vol. 57(C), pages 291-297.
    3. Hanaoka, Shinya & Takebayashi, Mikio & Ishikura, Tomoki & Saraswati, Batari, 2014. "Low-cost carriers versus full service carriers in ASEAN: The impact of liberalization policy on competition," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 96-105.
    4. Hideki Murakami & Ryota Asahi, 2011. "An empirical analysis of the effect of multimarket contacts on air carriers' pricing behaviors: A case of the U.S," Discussion Papers 2011-35, Kobe University, Graduate School of Business Administration.
    5. Huiru Zhao & Sen Guo & Qi Zhang & Chunjie Li, 2014. "Social Welfare Evaluation of Electric Universal Service in China: From the Perspective of Sustainability," Sustainability, MDPI, vol. 6(8), pages 1-17, August.
    6. Asahi, Ryota & Murakami, Hideki, 2017. "Effects of Southwest Airlines' entry and airport dominance," Journal of Air Transport Management, Elsevier, vol. 64(PA), pages 86-90.
    7. Borsati, Mattia & Fageda, Xavier, 2024. "Airline price responses in the face of demand shocks: European lessons from the COVID-19 pandemic," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 186(C).
    8. Wang, Kun & Tsui, Kan Wai Hong & Liang, Liping & Fu, Xiaowen, 2017. "Entry patterns of low-cost carriers in Hong Kong and implications to the regional market," Journal of Air Transport Management, Elsevier, vol. 64(PB), pages 101-112.
    9. Dresner, Martin & Eroglu, Cuneyt & Hofer, Christian & Mendez, Fabio & Tan, Kerry, 2015. "The impact of Gulf carrier competition on U.S. airlines," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 31-41.
    10. Bernardo, Valeria & Fageda, Xavier, 2020. "Impacts of competition on connecting travelers: Evidence from the transatlantic aviation market," Transport Policy, Elsevier, vol. 96(C), pages 141-151.
    11. Murakami, Hideki & Amano, Yoshihisa & Asahi, Ryota, 2015. "Dynamic effect of inter-firm rivalry on airfares: Case of Japan's full-service and new air carriers," Journal of Air Transport Management, Elsevier, vol. 44, pages 25-33.
    12. Ng, Kam To & Fu, Xiaowen & Hanaoka, Shinya & Oum, Tae Hoon, 2022. "Japanese aviation market performance during the COVID-19 pandemic - Analyzing airline yield and competition in the domestic market," Transport Policy, Elsevier, vol. 116(C), pages 237-247.
    13. Hideki Murakami & Yoshihisa Amano, 2013. "Dynamic effect of inter-airline rivalry on airfares and consumers' welfare: Japan' s full-service vs. new air carriers," Discussion Papers 2013-31, Kobe University, Graduate School of Business Administration.
    14. Kuljanin, Jovana & Kalić, Milica & Begović, Boris & Mijović, Nemanja & Renold, Manuel, 2021. "The effect of LCC market entry on dominant FSC's price into long haul sector: A case of Norwegian competition on British Airways' prices on selected transatlantic routes," Journal of Air Transport Management, Elsevier, vol. 91(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:47:y:2011:i:3:p:306-314. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.