nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒05‒06
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Entry and Accommodation in Airline Markets: Easyjet Caught in the Middle on the London-Grenoble Route By Cristina Barbot

  1. By: Cristina Barbot (CETE, Faculdade de Economia, Universidade do Porto)
    Abstract: Low cost carriers (LCCs) have recently proved that they can develop aggressive behaviour towards the threat of new entrants. This paper analyses the theoretical conditions under which a low cost carrier can deter or accommodate entry by means of product proliferation, using the example of Easyjet on the London-Grenoble route. Theoretical conclusions show that they can only deter entry if they launch a service with a quality that is superior to the entrant’s and to their own previous one. Otherwise, they accommodate entry by improving their old product, when they face the entry of a full service carrier (FSC), or by launching a new service, if they are caught in the middle of a FSC and another LCC. Empirical findings about competition in the same route in monopoly, duopoly and oligopoly with three firms show that price competition depends on the existence and nature of rivals, and on the level of demand.
    Keywords: low cost carriers, entry, accommodation
    JEL: L93 L13
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:por:cetedp:0602&r=ind

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