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Rivalry in the U.S. Airline Industry

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  • Barla, Philippe

Abstract

In this paper, we use Market Share Instability (MSI) as a measure of the intensity of competition among airlines on a specific route. This measure is used to capture not only price competition but also non-price competition notably capacity competition. We test the effect of different variables (used in pricing studies) on MSI on a sample of 400 routes over the period 1987 to 1993. Most of the results found in pricing studies are confirmed using this measure of rivalry. For example the presence of a bankrupt carrier increases rivalry but extensive multimarket contact between rivals decreases competition. We also find that MSI was significantly lower in the early nineties when demand conditions were weak. A decline in the intensity of capacity competition could explain that result.

Suggested Citation

  • Barla, Philippe, 1996. "Rivalry in the U.S. Airline Industry," Cahiers de recherche 9603, Université Laval - Département d'économique.
    • Handle: RePEc:lvl:laeccr:9603
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    References listed on IDEAS

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    1. Barla, Philippe & Koo, Bonchun, 1999. "Bankruptcy protection and pricing strategies in the US airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 35(2), pages 101-120, June.
    2. 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.
    3. Theodore E. Keeler, 1972. "Airline Regulation and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 399-424, Autumn.
    4. Caves, Richard E & Porter, Michael E, 1978. "Market Structure, Oligopoly, and Stability of Market Shares," Journal of Industrial Economics, Wiley Blackwell, vol. 26(4), pages 289-313, June.
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    Cited by:

    1. Barla, Philippe, 2000. "Firm size inequality and market power," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 693-722, July.

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    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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