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Strategic Choice of Alliance Membership under Local Competition and Global Networks

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  • Changmin Jiang
  • Yulai Wan
  • Tiziana D'Alfonso

Abstract

We propose a game theoretic model to analyse the partnership formation for two competing local airlines and two global airline alliances. We allow each airline to join any of the two alliances and each alliance to take either or both airlines. We find that multiple equilibrium outcomes may exist if these four players are involved in a simultaneous game. On the other hand, if a sequential game is played, we show that when either the market size or the product substitutability is relatively small, local airlines will join the same alliance in equilibrium. Otherwise, local airlines will stay independent. © 2015 LSE and the University of Bath

Suggested Citation

  • Changmin Jiang & Yulai Wan & Tiziana D'Alfonso, 2015. "Strategic Choice of Alliance Membership under Local Competition and Global Networks," Journal of Transport Economics and Policy, University of Bath, vol. 49(2), pages 316-337, April.
    • Handle: RePEc:tpe:jtecpo:v:49:y:2015:i:2:p:316-337
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    Citations

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    Cited by:

    1. Chen, Ruowei & Lei, Zheng, 2017. "Airport dominance and airline pricing power: An investigation of hub premiums in the Chinese domestic market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 509-524.
    2. Garg, Chandra Prakash, 2016. "A robust hybrid decision model for evaluation and selection of the strategic alliance partner in the airline industry," Journal of Air Transport Management, Elsevier, vol. 52(C), pages 55-66.
    3. Czerny, Achim I. & Jost, Peter-J. & Lang, Hao & Mantin, Benny, 2021. "Carrier collaboration with endogenous networks: Or, the limits of what carrier collaboration can achieve under antitrust immunity," Journal of Air Transport Management, Elsevier, vol. 94(C).
    4. Peng, I-Chin & Lu, Hua-An, 2022. "Coopetition effects among global airline alliances for selected Asian airports," Journal of Air Transport Management, Elsevier, vol. 101(C).
    5. Avenali, Alessandro & Bracaglia, Valentina & D'Alfonso, Tiziana & Reverberi, Pierfrancesco, 2018. "Strategic formation and welfare effects of airline-high speed rail agreements," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 393-411.
    6. Guo, Huanxiu & Jiang, Changmin & Wan, Yulai, 2018. "Can airfares tell? An alternative empirical strategy for airport congestion internalization," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 648-661.
    7. Volodymyr Bilotkach, 2019. "Airline Partnerships, Antitrust Immunity, and Joint Ventures: What We Know and What I Think We Would Like to Know," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 37-60, February.
    8. D’Alfonso, Tiziana & Jiang, Changmin & Bracaglia, Valentina, 2016. "Air transport and high-speed rail competition: Environmental implications and mitigation strategies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 261-276.
    9. Chao, Ching-Cheng & Kao, Ko-Ting, 2015. "Selection of strategic cargo alliance by airlines," Journal of Air Transport Management, Elsevier, vol. 43(C), pages 29-36.
    10. Jiang, Changmin & D'Alfonso, Tiziana & Wan, Yulai, 2017. "Air-rail cooperation: Partnership level, market structure and welfare implications," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 461-482.
    11. Zheng, Shiyuan & Ge, Ying-En & Fu, Xiaowen & Jiang, Changmin, 2019. "Voluntary carbon offset and airline alliance," Transportation Research Part B: Methodological, Elsevier, vol. 123(C), pages 110-126.

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