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Airline Deregulation and the Choice of Networks

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  • Berechman, Joseph
  • Shy, Oz

Abstract

/n this paper, we explore how incumbent airline firms restructure their route network in order to deter entry caused by deregulation. We demonstrate that under the threat of entry, following market deregulation, incumbent airline firms are more likely to operate hub-and-spoke type networks. In doing so, the firms will increase the frequency of service compared with a fully-connected type network case. Consequently, consumers' welfare will rise with deregulation.

Suggested Citation

  • Berechman, Joseph & Shy, Oz, 1991. "Airline Deregulation and the Choice of Networks," Foerder Institute for Economic Research Working Papers 275503, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275503
    DOI: 10.22004/ag.econ.275503
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    References listed on IDEAS

    as
    1. Bittlingmayer, George, 1990. "Efficiency and entry in a simple airline network," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 245-257, June.
    2. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    3. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
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