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Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route

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  • Norman, Victor D
  • Strandenes, Siri Pettersen

Abstract

The paper develops a numerical simulation model to assess the possible consequences of competition on inter-Scandinavian air routes, using the Oslo-Stockholm route as a case. In the model, demand for air transportation depends on the price and frequency, reflecting consumer preferences for travel and for time of departure. Initially, the market is taken to be an SAS monopoly, so the model is calibrated to estimates of prices and costs, data for demand, and to the first-order conditions for a monopolist. The model is then used to simulate symmetric, non-cooperative many-firm equilibria, described as a simultaneous Bertrand equilibrium in pricing and Cournot equilibrium in the number of flights offered. The simulation experiments indicate very substantial efficiency gains from competition.

Suggested Citation

  • Norman, Victor D & Strandenes, Siri Pettersen, 1990. "Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route," CEPR Discussion Papers 403, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:403
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    References listed on IDEAS

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    1. Norman, Victor D., 1989. "Trade policy under imperfect competition Theoretical ambiguities -- empirical regularities?," European Economic Review, Elsevier, vol. 33(2-3), pages 473-479, March.
    2. Baldwin, R. & Flam, H., 1989. "Strategic Trade Policies In The Market For 30-40 Seat Consumer Aircraft," Papers 431, Stockholm - International Economic Studies.
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    Cited by:

    1. Carlsson, Fredrik, 2002. "Price and Frequency Choice under Monopoly and Competition in Aviation Markets," Working Papers in Economics 71, University of Gothenburg, Department of Economics.
    2. Wei, Wenbin & Hansen, Mark, 2006. "An aggregate demand model for air passenger traffic in the hub-and-spoke network," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(10), pages 841-851, December.
    3. Reimer, Jeffrey J. & Steigert, Kyle W., 2006. "Imperfect Competition and Strategic Trade Theory: What Have We Learned?," Working Papers 201528, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    4. Schipper, Youdi & Rietveld, Piet & Nijkamp, Peter, 2007. "Frequency competition and environmental costs: An application to European air transport liberalization," Socio-Economic Planning Sciences, Elsevier, vol. 41(3), pages 208-223, September.
    5. Joseph A. Clougherty & Anming Zhang, 2009. "Domestic rivalry and export performance: theory and evidence from international airline markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 440-468, May.
    6. Schipper, Youdi & Rietveld, Piet & Nijkamp, Peter, 2003. "Airline deregulation and external costs: a welfare analysis," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 699-718, September.
    7. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    8. Yanhao Wei, 2018. "Airline networks, traffic densities, and value of links," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 341-370, September.
    9. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 1998. "Deregulation and Schedule Competition in Simple Airline Networks," ERSA conference papers ersa98p205, European Regional Science Association.
    10. Schipper, Youdi & Nijkamp, Peter & Rietveld, Piet, 2007. "Deregulation and welfare in airline markets: An analysis of frequency equilibria," European Journal of Operational Research, Elsevier, vol. 178(1), pages 194-206, April.
    11. Reimer Jeffrey J & Stiegert Kyle, 2006. "Imperfect Competition and Strategic Trade Theory: Evidence for International Food and Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-27, September.
    12. Vigren, Andreas, 2017. "Competition in Swedish passenger railway: Entry in an open access market and its effect on prices," Economics of Transportation, Elsevier, vol. 11, pages 49-59.
    13. Vigren, Andreas, 2016. "Competition in Swedish passenger railway : entry in an open-access market," Working papers in Transport Economics 2016:18, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    14. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    15. Vikrant Vaze & Cynthia Barnhart, 2012. "Modeling Airline Frequency Competition for Airport Congestion Mitigation," Transportation Science, INFORMS, vol. 46(4), pages 512-535, November.

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