Entry Deterrence and Strategic Alliances

Gayle, Philip and Xie, Xin (2017): Entry Deterrence and Strategic Alliances. Forthcoming in: Economic Inquiry

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Entry Deterrence; Strategic Alliances; Dynamic Entry/Exit Model; Airline Competition
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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