Policy of airline competition ~monopoly or duopoly~

Morimoto, Yu and Takeda, Kohei (2015): Policy of airline competition ~monopoly or duopoly~.

Abstract

We show that monopoly is better than competition in term of social welfare for low frequency routes. Competition affects both flight schedules and airfares. Flight schedules get un-even interval by competition and this leads to large scheduling delay cost (SDC). The increment of SDC is large when the number of flights is small. For low frequency routes, the increment of SDC by competition overwhelms the decreasing in the airfare, so monopoly is better than competition.

• Item Type: MPRA Paper
• Language: English
• Keywords: Scheduling Delay Cost, Airline Competition, Scheduling
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R41 - Transportation: Demand, Supply, and Congestion ; Travel Time ; Safety and Accidents ; Transportation Noise

References

1. Alderighi, M., Cento, A., Nijkamp, P. and Rietveld, P., “Network competition—the coexistence of hub-and-spoke and point-to-point systems”, Journal of Air Transport Management 11 (2011) 328–334.

2. Brueckner, J.K. and Spiller, P.T., “Competition and mergers in airline networks”, International Journal of Industrial Organization 9 (1991) 323-342.

3. Brueckner, J.K., “Airport Congestion When Carriers Have Market Power”, The American Economic Review 90 (2002) 1357-1375.

4. Brueckner, J.K., “Network Structure and Airline Scheduling”, The Journal of Industrial Economics 52 (2004) 291–312.

5. Flores-Fillol, R., “Airline competition and network structure”, Transportation Research Part B 43 (2009) 966–983.

6. Kawasaki, A., “Hub location with scheduling effects in a monopoly airline market”, The Annals of Regional Science 49 (2012) 805-819.

7. Mayer, C. and Sinai, T., “Why do airlines systematically schedule their flights to arrive late?”, The Wharton School, University of Pennsylvania (2003).

8. Santos, G. and Robin, M., “Determinants of delays at European airports”, Transportation Research Part B 44 (2010) 392–403.

9. Silva, H.E. and Verhoef, E.T., “Optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges”, Journal of Public Economics 106 (2013) 1–13.

10. Tseng, Y.Y., Ubbels, B. and Verhoef, E.T., “Value of time, schedule delay and reliability”, ERSA conference papers (2005)