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Incumbent Response to Entry by Low‐Cost Carriers in the U.S. Airline Industry

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  • Kerry M. Tan

Abstract

This article studies incumbent price response to entry by low‐cost carriers in the U.S. airline industry. I find that legacy carrier incumbents decrease their mean airfare, 10th percentile airfare, and 90th percentile airfare following entry by a low‐cost carrier. Airfares decrease by a larger percentage at the right tail of the incumbents’ price distribution than at the left tail, suggesting that increased competition from low‐cost carrier entrants leads to lower price dispersion.

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  • Kerry M. Tan, 2016. "Incumbent Response to Entry by Low‐Cost Carriers in the U.S. Airline Industry," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 874-892, January.
    • Handle: RePEc:wly:soecon:v:82:y:2016:i:3:p:874-892
    DOI: 10.1002/soej.12117
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    2. Liu, Qihong & Xie, Xin, 2024. "Product line competition: An empirical analysis of the Chinese airline industry," China Economic Review, Elsevier, vol. 83(C).

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