Competition behavior in service frequency for U.S. airlines

Real-life service frequency data from markets with duopoly or oligopoly structure in the U.S. domestic airline industry is analyzed to understand whether the nature of airline competition is similar to one described by Hotelling’s law, as applied to a perishable goods market. The paired-samples t te...

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Bibliographic Details
Published in:Service business 2015-03, Vol.9 (1), p.1-16
Main Authors: Cheng, Kuangnen, Chen, Hui-Ping, Lee, Jason Z.-H.
Format: Article
Language:English
Subjects:
Air fares
Airline industry
Airlines
Business and Management
Competition
Consumers
Customer services
Duopoly
Elasticity of demand
Empirical Article
Equilibrium
Game theory
Human Resource Management
Management
Market shares
Marketing
Oligopoly
Perishable goods
Product differentiation
Social responsibility
Studies
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Summary:Real-life service frequency data from markets with duopoly or oligopoly structure in the U.S. domestic airline industry is analyzed to understand whether the nature of airline competition is similar to one described by Hotelling’s law, as applied to a perishable goods market. The paired-samples t test statistic technique is employed to analyze 43,380 observations collected from thirty days worth of daily service frequencies in 1,000 largest U.S. city-pair markets. The results indicate that minimum differentiation competition behavior indeed prevails in duopoly markets. Firms are willing to locate far from the dominant player to capture consumer surplus in oligopoly markets.
ISSN:1862-8516
1862-8508
DOI:10.1007/s11628-013-0215-9