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Hub location with scheduling effects in a monopoly airline market

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  • Akio Kawasaki

Abstract

This paper tests whether it is possible to address the hub location problem using the industrial organization framework. In particular, it focuses on the scheduling effect on the demand side and the number of passengers traveling between each city pair. The study shows that the hub city is not always chosen such that the number of rim passengers is minimized. If this number increases, the monopoly airline loses revenue because many passengers use the airline service with lower airfare. However, the increase in rim passengers can strengthen scheduling effects, thereby increasing revenue. Additional simulation analyses with this strategy further show that the probability of choosing a hub city that is not socially preferable is small. Copyright Springer-Verlag 2012

Suggested Citation

  • 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.
    • Handle: RePEc:spr:anresc:v:49:y:2012:i:3:p:805-819
    DOI: 10.1007/s00168-011-0446-4
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    References listed on IDEAS

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    1. Alumur, Sibel & Kara, Bahar Y., 2008. "Network hub location problems: The state of the art," European Journal of Operational Research, Elsevier, vol. 190(1), pages 1-21, October.
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    Cited by:

    1. Akio Kawasaki, 2017. "Airport Privatization Competition Including Domestic Airline Markets," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 29(1), pages 2-17, March.
    2. Akio Kawasaki & Ming Hsin Lin, 2013. "Airline Schedule Competition and the Entry Route Choices of Low-Cost Carriers," Australian Economic Papers, Wiley Blackwell, vol. 52(2), pages 97-114, June.
    3. Akio Kawasaki, 2013. "Airport privatization competition including domestic airline networks," Working Papers e064, Tokyo Center for Economic Research.
    4. Lin, Ming Hsin, 2013. "Airport privatization in congested hub–spoke networks," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 51-67.
    5. Morimoto, Yu & Takeda, Kohei, 2015. "Policy of airline competition ~monopoly or duopoly~," MPRA Paper 63258, University Library of Munich, Germany.
    6. Kawamori, Tomohiko & Lin, Ming Hsin, 2013. "Airline mergers with low cost carriers," Economics of Transportation, Elsevier, vol. 2(2), pages 63-71.

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    More about this item

    Keywords

    L93; R41;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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