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Non-Cooperative Game Theory in Measuring Strategic Interactions between Airline Joint-Venture Alliances

Author

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  • Dominik Boniecki
  • Elzbieta Marciszewska

Abstract

Purpose: The paper proposes a research method for measuring strategic interactions between airline joint-venture alliances that compete with each other. Design/Methodology/Approach: The proposed method is based on the non-cooperative game theory with a Nash-Cournot equilibrium. It consists in the development of a model that compares economic performance of airline long-haul, intercontinental operations in two consecutive scenarios, before and after joining an alliance. Findings: A model of strategic interactions between airline joint-venture alliances can be successfully based on the logic of the Nash-Cournot equilibrium. Furthermore, the game theory is an effective tool for analysing economic performance of airline joint business agreements. Practical Implications: The method can be used in measuring bottom line performance of long-haul airline joint business agreements world-wide. For example, on the EU–US airline market, the method can be used in the analysis of the following alliances: United Airlines – Lufthansa Group; American Airlines – International Airlines Group – Finnair; Delta Air Lines – Air France KLM – Virgin Atlantic. Originality/Value: This is a novel approach to research of advanced airline alliance strategies.

Suggested Citation

  • Dominik Boniecki & Elzbieta Marciszewska, 2021. "Non-Cooperative Game Theory in Measuring Strategic Interactions between Airline Joint-Venture Alliances," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 152-164.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:2:p:152-164
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    References listed on IDEAS

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    1. Philippe Barla & Christos Constantatos, 2006. "On The Choice between Strategic Alliance and Merger in the Airline Sector: The Role of Strategic Effects," Journal of Transport Economics and Policy, University of Bath, vol. 40(3), pages 409-424, September.
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    3. Xing Hu & René Caldentey & Gustavo Vulcano, 2013. "Revenue Sharing in Airline Alliances," Management Science, INFORMS, vol. 59(5), pages 1177-1195, May.
    4. 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.
    5. Xavier Fageda & Ricardo Flores-Fillol & Bernd Theilen, 2019. "Joint Ventures in the Transatlantic Airline Market," Advances in Airline Economics, in: Airline Economics in Europe, volume 8, pages 117-136, Emerald Group Publishing Limited.
    6. Adler, Nicole & Smilowitz, Karen, 2007. "Hub-and-spoke network alliances and mergers: Price-location competition in the airline industry," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 394-409, May.
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    Cited by:

    1. Grosche, Tobias & Klophaus, Richard, 2024. "Codesharing and airline partnerships within, between and outside global alliances," Journal of Air Transport Management, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    Airline strategy; airline joint-ventures; economic performance; game theory.;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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