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Appendix to “Cost pass-through in Commercial Aviation: Theory and Evidence” – Theoretical Derivations

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  • Gayle, Philip
  • Lin, Ying

Abstract

This appendix serves as a supplement to “Cost Pass-through in Commercial Aviation: Theory and Evidence.” In this appendix we present the computational details of the theoretical model as well as the model predictions described in the text of the above-mentioned paper. Using a model of air travel demand and supply for an origin-destination market, we derive the closed-form expression for Nash equilibrium airfares, and use the closed-form expression to perform a series of comparative statics exercises. In particular, crucial expressions for obtaining predictions in Table 1 and Table 2 in the paper (Gayle and Lin, 2020) are provided.

Suggested Citation

  • Gayle, Philip & Lin, Ying, 2020. "Appendix to “Cost pass-through in Commercial Aviation: Theory and Evidence” – Theoretical Derivations," MPRA Paper 101973, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101973
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    File URL: https://mpra.ub.uni-muenchen.de/101973/1/MPRA_paper_101973.pdf
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    References listed on IDEAS

    as
    1. Philip G. Gayle & Ying Lin, 2021. "Cost Pass‐Through In Commercial Aviation: Theory And Evidence," Economic Inquiry, Western Economic Association International, vol. 59(2), pages 803-828, April.
    2. Wang, X. Henry & Zhao, Jingang, 2007. "Welfare reductions from small cost reductions in differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 173-185, February.
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    More about this item

    Keywords

    Crude oil-Airfare Cost Pass-through; Jet fuel hedging;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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