| By: |
Vera Alves (Universidade do Porto);
Rosa Forte (Faculdade de Economia, Universidade do Porto, and cef.up) |
| Abstract: |
In the last decades there has been a gradual liberalisation of international
air transport markets through the implementation of open skies agreements
which seek the deregulation of the air transport industry and consequently the
functioning of the market in a freer way. The objective of this work is to
study the effects of an open skies agreement in order to understand if the
airlines and the consumers will benefit after the market deregulation. With
this purpose, we developed a Cournot model to compare the initial situation
(without agreement) and the situation after the implementation of the open
skies agreement. Based on the model developed it can be concluded that the
prices on international market segments where competition increases should
decline after market liberalisation, thus benefiting consumers. Regarding the
incumbent airlines in the market, an open skies agreement should jeopardize
the airlines that fail to operate new routes after the agreement, leading to
decreased profits. |
| Keywords: |
Open Skies agreement; Cournot model; Effects on prices; Firms’ profits. |
| JEL: |
D43 D21 |
| Date: |
2013–06 |
| URL: |
https://d.repec.org/n?u=RePEc:por:cetedp:1311 |