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The Price of Airline Frequency Competition

In: Game Theoretic Analysis of Congestion, Safety and Security

Author

Listed:
  • Vikrant Vaze

    (Dartmouth College)

  • Cynthia Barnhart

    (Massachusetts Institute of Technology)

Abstract

Competition based on service frequency influences capacity decisions in airline markets and has important implications for airline profitability and airport congestion. The market share of a competing airline is a function of its frequency share. This relationship is pivotal for understanding the impacts of frequency competition on airport congestion and on the airline business in general. Additionally, airport congestion is closely related to several aspects of runway, taxiway, and airborne safety. Based on the most popular form of the relationship between market share and frequency share, we propose a game-theoretic model of frequency competition. We characterize the conditions for Nash equilibrium’s existence and uniqueness for the two-player case. We analyze myopic learning dynamics for the non-equilibrium situations and prove their convergence to Nash equilibrium under mild conditions. For the N-player symmetric game, we characterize all the pure strategy equilibria and identify the worst-case equilibrium, i.e., the equilibrium with maximum total cost. We provide a measure of the congestion level, based on the concept of price of anarchy and investigate its dependence on game parameters.

Suggested Citation

  • Vikrant Vaze & Cynthia Barnhart, 2015. "The Price of Airline Frequency Competition," Springer Series in Reliability Engineering, in: Kjell Hausken & Jun Zhuang (ed.), Game Theoretic Analysis of Congestion, Safety and Security, edition 127, pages 173-217, Springer.
    • Handle: RePEc:spr:ssrchp:978-3-319-13009-5_7
    DOI: 10.1007/978-3-319-13009-5_7
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    Citations

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    Cited by:

    1. Hansen, Mark & Liu, Yi, 2015. "Airline competition and market frequency: A comparison of the s-curve and schedule delay models," Transportation Research Part B: Methodological, Elsevier, vol. 78(C), pages 301-317.
    2. Wang, Chun-Han & Zhang, Wenzhu & Dai, Yue & Lee, Yu-Ching, 2022. "Frequency competition among airlines on coordinated airports network," European Journal of Operational Research, Elsevier, vol. 297(2), pages 484-495.

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