Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets

Borenstein, Severin; Netz, Janet S.

doi:10.1016/s0167-7187(97)00058-1

Cited by 143 publications

(88 citation statements)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Empirical evidence concerning spatial di erentiation can be found in Borenstein and Netz (1999). Additionally, Lieberman and Asaba (2006) surveys the empirical ndings on imitation among rms.…”

Section: Literaturementioning

confidence: 99%

The Recommendation Effect in the Hotelling Game - A New Result for an Old Model

Conze

Kramm

2013

SSRN Journal

View full text Add to dashboard Cite

show abstract

Section: Literaturementioning

confidence: 99%

The Recommendation Effect in the Hotelling Game - A New Result for an Old Model

Conze

Kramm

2013

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Another body of research focuses on the airlines' scheduling decisions under competition using variants of the spatial model developed by Hotelling (1929). See, for example, the recent empirical papers by Borenstein and Netz (1999) and Richard (2003). These papers focus on broad competitive problems and ignore the specifics of seat inventory allocation.…”

Section: Related Literaturementioning

confidence: 99%

Revenue Management Games: Horizontal and Vertical Competition

2005

View full text Add to dashboard Cite

A well-studied problem in the literature on airline revenue (or yield) management is the optimal allocation of seat inventory among fare classes, given a demand distribution for each class. In practice, the seat allocation decisions of one airline affect the passenger demands for seats on other airlines. In this paper, we examine the seat inventory control problem under both horizontal competition (two airlines compete for passengers on the same flight leg) and vertical competition (different airlines fly different legs on a multileg itinerary). Such vertical competition can be the outcome of a code-sharing agreement between airlines, because each airline sells seats on the partner airlines' flights but the airlines are unwilling, or unable, to coordinate yield management decisions. We provide a general sufficient condition under which a pure-strategy Nash equilibrium exists in these revenue management games, and we also compare the total number of seats available in each fare class with, and without, competition. Analytical results as well as numerical examples demonstrate that more seats are protected for higher-fare passengers under horizontal competition than when a single airline acts as a monopoly. Under vertical competition the booking limit may be higher or lower, however, than the monopoly level, depending on the demand for connecting flights in each fare class. Finally, we discuss revenue-sharing contracts that coordinate the actions of both airlines. Horizontal and Vertical CompetitionAbstract: A well-studied problem in the literature on airline revenue (or yield) management is the optimal allocation of seat inventory among fare classes given a demand distribution for each class. In practice, the seat allocation decisions of one airline affect the passenger demands for seats on other airlines. In this paper we examine the seat inventory control problem under both horizontal competition (two airlines compete for passengers on the same flight leg) and vertical competition (different airlines fly different legs on a multi-leg itinerary). Such vertical competition can be the outcome of a code sharing agreement between airlines, for each airline sells seats on the partner airlines' flights but the airlines are unwilling, or unable, to coordinate yield management decisions. We provide a quite general sufficient condition under which a pure-strategy Nash equilibrium exists in these 'revenue management games', and we also compare the total number of seats available in each fare class with, and without, competition.Analytical results as well as numerical examples demonstrate that under horizontal competition more seats are protected for higher-fare passengers than when a single airline acts as a monopoly, while under vertical competition the booking limit may be higher, or lower, than the monopoly level, depending upon the demand for connecting flights in each fare class. Finally, we discuss revenue-sharing contracts that coordinate the actions of both airlines.

show abstract

“…Despite the resulting elimination of space, the model effectively involves horizontal competition in the Hotelling tradition, with exogenous brand loyalty to individual carriers providing a choice friction analogous to the spatial friction in the Hotelling model. In contrast to this approach, Borenstein and Netz (1999) carry out an empirical analysis whose focus is the departure times of individual flights rather than overall frequencies, and they rely on a spatial competition model to motivate the analysis. Their goal is to identify market characteristics that lead to greater clustering of departure times for different carriers.…”

Section: Introductionmentioning

confidence: 99%

Measuring strategic firm interaction in product-quality choices: The case of airline flight frequency

Brueckner

Luo

2014

Economics of Transportation

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Measuring Strategic Firm Interaction in Product-Quality Choices: The Case of Airline Flight Frequency Abstract This paper investigates strategic interaction among airlines in product-quality choices. Using an instrumental variables approach, the paper estimates flight-frequency reaction functions, which relate an airline's frequency on a route to its own characteristics and to the frequencies of competing airlines. A positive reaction function slope is found in some cases, indicating the presence of strategic interaction in the choice of frequencies. The paper also asks whether multimarket contact generates mutual forbearance in frequency competition, finding no evidence for such an effect. JEL-Code: L100, L930. Terms of use: Documents in EconStor may

show abstract

Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets

Cited by 143 publications

References 15 publications

The Recommendation Effect in the Hotelling Game - A New Result for an Old Model

The Recommendation Effect in the Hotelling Game - A New Result for an Old Model

Revenue Management Games: Horizontal and Vertical Competition

Measuring strategic firm interaction in product-quality choices: The case of airline flight frequency

Contact Info

Product

Resources

About