IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v57y2013icp85-94.html
   My bibliography  Save this article

Network competition and the difference in operating cost: Model analysis

Author

Listed:
  • Takebayashi, Mikio

Abstract

In this paper, we propose a bi-level air transport market model which can handle the shape of network, airfare and service frequency as airline’s control variables and passenger’s behavior. We apply the model to the simple duopolistic market and observe how airlines change their network shape. We assume two types of airlines, the incumbent and the entrant, having different operating cost and conduct numerical computation. From the results, we discuss the features of network equilibrium considering difference in operating cost and confirm that inviting low cost carriers contributes to improving social welfare.

Suggested Citation

  • Takebayashi, Mikio, 2013. "Network competition and the difference in operating cost: Model analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 85-94.
    • Handle: RePEc:eee:transe:v:57:y:2013:i:c:p:85-94
    DOI: 10.1016/j.tre.2013.01.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554513000185
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2013.01.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    References listed on IDEAS

    as
    1. Ken Hendricks & Michele Piccione & Guofu Tan, 1995. "The Economics of Hubs: The Case of Monopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 83-99.
    2. Lam, William H. K. & Zhou, Jing & Sheng, Zhao-han, 2002. "A capacity restraint transit assignment with elastic line frequency," Transportation Research Part B: Methodological, Elsevier, vol. 36(10), pages 919-938, December.
    3. Ken Hendricks & Michele Piccione & Guofu Tan, 1999. "Equilibria in Networks," Econometrica, Econometric Society, vol. 67(6), pages 1407-1434, November.
    4. Takebayashi, Mikio, 2011. "The runway capacity constraint and airlines' behavior: Choice of aircraft size and network design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(3), pages 390-400, May.
    5. Nicole Adler, 2005. "Hub-Spoke Network Choice Under Competition with an Application to Western Europe," Transportation Science, INFORMS, vol. 39(1), pages 58-72, February.
    6. Reynolds-Feighan, Aisling, 2001. "Traffic distribution in low-cost and full-service carrier networks in the US air transportation market," Journal of Air Transport Management, Elsevier, vol. 7(5), pages 265-275.
    7. Ken Hendricks & Michele Piccione & Guofu Tan, 1997. "Entry and Exit in Hub-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 291-303, Summer.
    8. Bell, Michael G. H., 1995. "Stochastic user equilibrium assignment in networks with queues," Transportation Research Part B: Methodological, Elsevier, vol. 29(2), pages 125-137, April.
    9. Gorin, Thomas & Belobaba, Peter, 2008. "Assessing predation in airline markets with low-fare competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(5), pages 784-798, June.
    10. Barbot, Cristina, 2008. "Can low cost carriers deter or accommodate entry?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(5), pages 883-893, September.
    11. Adler, Nicole, 2001. "Competition in a deregulated air transportation market," European Journal of Operational Research, Elsevier, vol. 129(2), pages 337-345, March.
    12. Zhou, Jing & Lam, William H.K. & Heydecker, Benjamin G., 2005. "The generalized Nash equilibrium model for oligopolistic transit market with elastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 39(6), pages 519-544, July.
    13. Pels, Eric, 2009. "Network competition in the open aviation area," Journal of Air Transport Management, Elsevier, vol. 15(2), pages 83-89.
    14. Vowles, Timothy M., 2001. "The “Southwest Effect†in multi-airport regions," Journal of Air Transport Management, Elsevier, vol. 7(4), pages 251-258.
    15. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 239-256, May.
    16. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, vol. 54(1), pages 81-94, September.
    17. Hsu, Chaug-Ing & Wen, Yuh-Horng, 2003. "Determining flight frequencies on an airline network with demand-supply interactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 39(6), pages 417-441, November.
    18. Mikio Takebayashi, 2011. "Evaluation Of Asian Airports As Gateways: Application Of Network Equilibrium Model," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 64-82, February.
    19. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December.
    20. Lin, Ming Hsin, 2012. "Airlines-within-airlines strategies and existence of low-cost carriers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(3), pages 637-651.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. 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.
    2. Takebayashi, Mikio, 2021. "Workability of a multiple-gateway airport system with a high-speed rail network," Transport Policy, Elsevier, vol. 107(C), pages 61-71.
    3. Takebayashi, Mikio & Onishi, Masamitsu, 2018. "Managing reliever gateway airports with high-speed rail network," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 133-146.
    4. Babić, Danica & Begović, Boris & Levajković, Tijana, 2023. "Probabilistic model for the impact of fear of flying on airline network structures," Journal of Air Transport Management, Elsevier, vol. 109(C).
    5. Takebayashi, Mikio, 2018. "Managing airport charges under the multiple hub network with high speed rail: Considering capacity and gateway function," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 108-123.
    6. Babić, Danica & Kalić, Milica, 2018. "Modeling the selection of airline network structure in a competitive environment," Journal of Air Transport Management, Elsevier, vol. 66(C), pages 42-52.
    7. 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.
    8. Takebayashi, Mikio & Yamaguchi, Hiromichi, 2022. "Managing a multiple-gateway airport system with super high-speed rail," Journal of Air Transport Management, Elsevier, vol. 99(C).
    9. Takebayashi, Mikio, 2016. "How could the collaboration between airport and high speed rail affect the market?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 277-286.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tu, Ningwen & Li, Zhi-Chun & Fu, Xiaowen & Lei, Zheng, 2020. "Airline network competition in inter-continental market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 143(C).
    2. 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.
    3. Wang, Chunan & Wang, Xiaoyu, 2019. "Airport congestion delays and airline networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 328-349.
    4. Li, Zhi-Chun & Lam, William H.K. & Wong, S.C. & Fu, Xiaowen, 2010. "Optimal route allocation in a liberalizing airline market," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 886-902, August.
    5. Lin, Ming Hsin, 2012. "Airlines-within-airlines strategies and existence of low-cost carriers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(3), pages 637-651.
    6. Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airline route structure competition and network policy," Transportation Research Part B: Methodological, Elsevier, vol. 67(C), pages 320-343.
    7. Yanhao Wei, 2018. "Airline networks, traffic densities, and value of links," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 341-370, September.
    8. Takebayashi, Mikio & Kanafani, Adib, 2005. "Network Competition in Air Transportation Markets: Bi-Level Approach," Research in Transportation Economics, Elsevier, vol. 13(1), pages 101-119, January.
    9. Fu, Xiaowen & Jin, Huan & Liu, Shaoxuan & Oum, Tae H. & Yan, Jia, 2019. "Exploring network effects of point-to-point networks: An investigation of the spatial patterns of Southwest Airlines’ network," Transport Policy, Elsevier, vol. 76(C), pages 36-45.
    10. Babić, Danica & Begović, Boris & Levajković, Tijana, 2023. "Probabilistic model for the impact of fear of flying on airline network structures," Journal of Air Transport Management, Elsevier, vol. 109(C).
    11. Wang, Kun & Fu, Xiaowen & Czerny, Achim I. & Hua, Guowei & Lei, Zheng, 2020. "Modeling the potential for aviation liberalization in Central Asia – Market analysis and implications for the Belt and Road Initiative," Transportation Research Part A: Policy and Practice, Elsevier, vol. 134(C), pages 184-210.
    12. Jia Yan & Xiaowen Fu & Tae Oum, 2008. "Exploring Network Effects of Point-to-Point Networks: An Investigation of the Spatial Entry Patterns of Southwest Airlines," Working Papers 2008-21, School of Economic Sciences, Washington State University.
    13. 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.
    14. Yetiskul, Emine & Matsushima, Kakuya & Kobayashi, Kiyoshi, 2005. "Airline Network Structure with Thick Market Externality," Research in Transportation Economics, Elsevier, vol. 13(1), pages 143-163, January.
    15. Babić, Danica & Kalić, Milica, 2018. "Modeling the selection of airline network structure in a competitive environment," Journal of Air Transport Management, Elsevier, vol. 66(C), pages 42-52.
    16. Wang, Chunan & Jiang, Changmin, 2022. "How do pandemics affect intercity air travel? Implications for traffic and environment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 166(C), pages 330-353.
    17. Sheng, Dian & Li, Zhi-Chun & Xiao, Yi-bin & Fu, Xiaowen, 2015. "Slot auction in an airport network with demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 82(C), pages 79-100.
    18. Aguirregabiria, Victor & Ho, Chun-Yu, 2012. "A dynamic oligopoly game of the US airline industry: Estimation and policy experiments," Journal of Econometrics, Elsevier, vol. 168(1), pages 156-173.
    19. Xu, Yifan & Adler, Nicole & Wandelt, Sebastian & Sun, Xiaoqian, 2024. "Competitive integrated airline schedule design and fleet assignment," European Journal of Operational Research, Elsevier, vol. 314(1), pages 32-50.
    20. Lieshout, Rogier & Malighetti, Paolo & Redondi, Renato & Burghouwt, Guillaume, 2016. "The competitive landscape of air transport in Europe," Journal of Transport Geography, Elsevier, vol. 50(C), pages 68-82.

    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:57:y:2013:i:c:p:85-94. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.