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Entry Deterrence and Strategic Alliances

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  • Gayle, Philip
  • Xie, Xin

Abstract

Researchers have written extensively on the impact that strategic alliances between airlines have on airfare, but little is known of the market entry deterrent impact of strategic alliances. Using a structural econometric model, this paper examines the market entry deterrent impact of codesharing, a form of strategic alliance, between incumbent carriers in domestic air travel markets. We find evidence of market entry deterrence, but deterrence impact depends on the specific type of codesharing between market incumbents as well as the identity of the potential entrant. We quantify the extent to which market incumbents’ codesharing influences potential entrants market entry cost and probability of market entry.

Suggested Citation

  • Gayle, Philip & Xie, Xin, 2017. "Entry Deterrence and Strategic Alliances," MPRA Paper 83233, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:83233
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    Cited by:

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    2. Victor Aguirregabiria & Mathieu Marcoux, 2021. "Imposing equilibrium restrictions in the estimation of dynamic discrete games," Quantitative Economics, Econometric Society, vol. 12(4), pages 1223-1271, November.
    3. 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.
    4. Chen, Yongmin & Gayle, Philip G., 2019. "Mergers and product quality: Evidence from the airline industry," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 96-135.
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    6. Gayle, Philip G. & Xie, Xin, 2019. "Firms’ markup, cost, and price changes when policymakers permit collusion: Does antitrust immunity matter?," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 680-707.
    7. Tsunoda, Yushi, 2023. "Airport concession revenue sharing and entry deterrence," Economics of Transportation, Elsevier, vol. 33(C).

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    More about this item

    Keywords

    Entry Deterrence; Strategic Alliances; Dynamic Entry/Exit Model; Airline Competition;
    All these keywords.

    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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