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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.

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... Some researchers, such as [64,65], claim that alliances between airlines or with destinations contribute to streamlining costs. Frequency competition is critical for a full-service airline in gaining market share [64], and this allows airlines to increase ticket prices without losing demand [66]. Furthermore, airport slots represent an important avenue for further research on the airlines [67], on how airlines enhance the practice of price discrimi- The second stream deals with airlines (legacy and low-cost carriers) and airlines and cities' alliances to improve the accessibility and frequency at destinations and airports. ...
... Some researchers, such as [64,65], claim that alliances between airlines or with destinations contribute to streamlining costs. Frequency competition is critical for a full-service airline in gaining market share [64], and this allows airlines to increase ticket prices without losing demand [66]. Furthermore, airport slots represent an important avenue for further research on the airlines [67], on how airlines enhance the practice of price discrimination in the globalised market or 'the high dependence of airlines on efficiency and productivity gains [68], and to reduce carbon emissions by airlines. ...
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... In the context of Kalimarau Airport, efforts to provide accessibility facilities for people with disabilities are in place, such as specialized lifts, accessible restrooms, ramps, priority seating, and assistance [14] [15]. However, there are still deficiencies in the facilities provided, such as the absence of disability restrooms in the baggage check-in area and the lack of priority seating in the departure area [16] [17]. ...
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Article
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Article
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Article
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Article
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Article
The paper argues that entry is deterred in an industry when existing firms have enough capacity to make a new entrant unprofitable. This capacity need not be fully utilized in the absence of entry. This can result in larger costs than are necessary, given output levels. It also results in higher prices and lower levels of output than those implied by various forms of the limit price model. Capacity and other forms of investment are effective entry deterring variables, partly because they are irreversible and represent preemptive commitments to the industry.
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We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry). We look specifically at passenger airlines, using the evolution of Southwest Airlines' route network to identify particular routes where the probability of future entry rises abruptly. We find that incumbents cut fares significantly when threatened by Southwest's entry. Over half of Southwest's total impact on incumbent fares occurs before Southwest starts flying. These cuts are only on threatened routes, not those out of non-Southwest competing airports. The evidence on whether incumbents are seeking to deter or accommodate entry is mixed.
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In the past decade, low-cost carriers that offer point-to-point connections with frequent services have been consistently more profitable than those operating hub-and-spoke networks. Therefore, we study the advantages of each network as compared with the other. In addition to actual fares, time costs also affect the consumers' preferences, so the increase in flight frequency causes an increase in demand. Besides, the more passengers the airline carries, the more frequent services it offers. Thus, a positive feedback mechanism is incorporated into an economy of frequency. Additionally, the complementarity that arises from the demand for two-way trips is investigated.
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This paper presents a simple model of airline schedule competition that circumvents the complexities of the spatial approach used in earlier papers. Consumers choose between two duopoly carriers, each of which has evenly spaced flights, by comparing the combinations of fare and expected schedule delay that they offer. In contrast to the spatial approach, the particular departure times of individual flights are thus not relevant. The model generates a number of useful comparative-static predictions, while welfare analysis shows that equilibrium flight frequencies tend to be inefficiently low.