Valido, J;
Socorro, P;
Medda, F;
(2020)
Airport capacity and entry deterrence: Low cost versus full service airlines.
Economics of Transportation
, 22
, Article 100165. 10.1016/j.ecotra.2020.100165.
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Abstract
We study entry deterrence in air transport markets with a full-service (FS) carrier (the incumbent) and a low-cost (LC) carrier (the potential entrant). We consider a vertically differentiated product model where airlines have different operating cost and different generalized prices so they compete in ticket prices and frequencies. Thus, more frequency allows airlines to increase ticket prices without losing demand. In this context, we show that the incumbent may increase the frequency offered in order to deter the LC carrier entry. We show that if the airport capacity is low enough the LC carrier entry can be easily blocked or deterred. However, if the airport capacity is sufficiently high, the LC carrier entry must be accommodated. Regulators should take these results into account in order to promote competition among airlines.
| Type: | Article |
|---|---|
| Title: | Airport capacity and entry deterrence: Low cost versus full service airlines |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.ecotra.2020.100165 |
| Publisher version: | https://doi.org/10.1016/j.ecotra.2020.100165 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Low-cost carriers, Full-service carriers, Entry deterrence, Airport capacity |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Civil, Environ and Geomatic Eng |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10095069 |
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