Empirical Essays on the U.S. Airline Industry PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Empirical Essays on the U.S. Airline Industry PDF full book. Access full book title Empirical Essays on the U.S. Airline Industry by Jinkook Lee. Download full books in PDF and EPUB format.
Author: Jinkook Lee
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This dissertation studies the effects of firm's collaborative strategy on both demand and supply, and equilibrium to derive various welfare implications. I explain both horizontal mergers and vertical relationships, focusing on the U.S. airline industry. In the first study, I address significant limitations of traditional merger simulations which have focused solely on price changes while constraining the set of product characteristics to be identical pre- and post-merger. To overcome the limitations, I endogenize both prices and product characteristics by specifying a two-stage oligopoly game. After estimating demand and supply system, I simulate the effect of the Delta and Northwest Airlines merger on prices, product characteristics, and welfare. The simulation results show that the merged firm tends to increase product differentiation post-merger, the higher product differentiation reduces the firm's incentive to raise prices, and the changes in characteristics and prices increase not only the merged firm's profit but also consumer welfare. I also compare the predicted to actual post-merger outcome and find that endogenizing product characteristics is essential to better predict the actual outcome. The second study investigates the impact of contractual agreements regarding gates between airports and carriers on major carrier's market power. Competition Plans reported by thirty one hub airports provide information on a carrier's gate-occupancy, sublease agreement, and Majority-In-Interest clauses at an airport. I estimate the effects of these contractual practices on passengers' utility and carriers' marginal costs. The main results show that a carrier's gate dominance has a positive effect on the demand side through passengers' utility, and business travelers have a higher willingness to pay for gates than tourists. On the supply side, a carrier's gate dominance decreases its own marginal cost, especially when the airport is congested. Furthermore, the existence of sublease agreement at an airport is likely to increase non-signatory carriers' marginal costs, whereas the provision of Majority-In-Interest clauses increases signatory carriers' marginal costs. Based on the estimates, I execute a counterfactual analysis and find that regulatory limits on gate occupancy can reduce the differentials in costs and profits between signatory and non-signatory airlines. The electronic version of this dissertation is accessible from http://hdl.handle.net/1969.1/152644
Author: Jinkook Lee
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This dissertation studies the effects of firm's collaborative strategy on both demand and supply, and equilibrium to derive various welfare implications. I explain both horizontal mergers and vertical relationships, focusing on the U.S. airline industry. In the first study, I address significant limitations of traditional merger simulations which have focused solely on price changes while constraining the set of product characteristics to be identical pre- and post-merger. To overcome the limitations, I endogenize both prices and product characteristics by specifying a two-stage oligopoly game. After estimating demand and supply system, I simulate the effect of the Delta and Northwest Airlines merger on prices, product characteristics, and welfare. The simulation results show that the merged firm tends to increase product differentiation post-merger, the higher product differentiation reduces the firm's incentive to raise prices, and the changes in characteristics and prices increase not only the merged firm's profit but also consumer welfare. I also compare the predicted to actual post-merger outcome and find that endogenizing product characteristics is essential to better predict the actual outcome. The second study investigates the impact of contractual agreements regarding gates between airports and carriers on major carrier's market power. Competition Plans reported by thirty one hub airports provide information on a carrier's gate-occupancy, sublease agreement, and Majority-In-Interest clauses at an airport. I estimate the effects of these contractual practices on passengers' utility and carriers' marginal costs. The main results show that a carrier's gate dominance has a positive effect on the demand side through passengers' utility, and business travelers have a higher willingness to pay for gates than tourists. On the supply side, a carrier's gate dominance decreases its own marginal cost, especially when the airport is congested. Furthermore, the existence of sublease agreement at an airport is likely to increase non-signatory carriers' marginal costs, whereas the provision of Majority-In-Interest clauses increases signatory carriers' marginal costs. Based on the estimates, I execute a counterfactual analysis and find that regulatory limits on gate occupancy can reduce the differentials in costs and profits between signatory and non-signatory airlines. The electronic version of this dissertation is accessible from http://hdl.handle.net/1969.1/152644
Author: Chiranjit Kundu
Publisher:
ISBN:
Category :
Languages : en
Pages : 101
Get Book Here
Book Description
My dissertation research investigates a range of issues related to entry into the US Domestic Airline Industry. First, I study the welfare consequences of unregulated entry into domestic airline markets, and evaluate the loss of welfare due to deviation from the first best social optimal outcome. My study shows evidence of excessive entry mostly occurring due to the presence of more than optimal number of indirect carriers in some of the markets. Next, I consider the alleged entry deterrence effects of codesharing alliances by assessing the efficacy of such arrangements in preventing the entry of low cost carriers(LCCs). Finally, I empirically investigate how such codesharing arrangements among the incumbent carriers influence their preemptive pricing behavior in the face of entry threats from the LCCs. The findings from these two studies show that even though the codesharing alliances are not strong enough as barriers to discourage the entry of LCCs, to some extent their presence soften the aggressive pricing behavior of the incumbent airlines in anticipation of entry threats.
Author: Tak Keung Wong
Publisher:
ISBN: 9781267477156
Category :
Languages : en
Pages :
Get Book Here
Book Description
The third manuscript studies the entry patterns of virtual code-sharing alliances. Specially, I examine the entry patterns of United-US Airways virtual code-sharing alliance. I use a probit model to estimate the reduced-form equation for the entry decisions of virtual code-sharing alliances. The empirical results suggest that Southwest Airlines is not the direct competitor to virtual code-sharing alliances.
Author: Holly Hanson Johnston
Publisher:
ISBN:
Category :
Languages : en
Pages : 230
Get Book Here
Book Description
Author: Junqiushi Ren
Publisher:
ISBN:
Category : Industrial organization (Economic theory)
Languages : en
Pages : 101
Get Book Here
Book Description
This dissertation consists of three essays. The first essay studies an online platform, namely, Groupon, and the second and third essays explore the US airline industry. All of the essays are in the field of empirical IO. The first essay, “The Role of Reputation in Daily Deal Markets: The Case of Groupon,” addresses the question of whether and how business reputation alters the sales and promotion results of daily deals. Daily deals are online discount vouchers offered by local businesses and advertised on deal sites. They have become very popular in recent years with the popularity of Internet and mobile apps. To study the role of reputation in daily deal markets, I scrape daily deals in 17 large cities from Groupon (the biggest daily deal site), which is then matched with a demographic dataset extracted from 2009-2013 5-Year American Community Survey. I first use the restaurant category as a baseline, and show that reputation, measured by the percentage of positive reviews on Groupon, is positively associated with the sales of vouchers. I then include reputation from external platforms, namely, the average star ratings from Yelp and Google, and find that although these ratings are positively associated with voucher sales, such relationship is much weaker compared to that with Groupon ratings. Subsequently, I use the number of Yelp reviews that mentions the keyword “Groupon” as a proxy of customer flows that were brought in by Groupon directly, and show that reputation is positively associated with the promotion results of daily deals. Finally, I extend the analysis to categories other than restaurants. Results show that business reputation is positively related to the sales of vouchers in all categories, though the extent varies. In particular, the relationship is relatively strong for restaurants and health, and relatively weak for beauty and entertainment. The second essay, “A Re-examination of Southwest’s Entry,” studies how Southwest Airlines, the biggest low-cost carrier in the US, affects legacy carriers’ pricing. While much of the literature on low-cost carriers focus on nonstop markets, this paper extends this body of scholarship to connecting markets, and find that the entry of Southwest imposes a substantial downward pressure on the prices in both nonstop and connecting markets. Moreover, I find that the price drops are much larger in connecting markets than in nonstop markets. My findings also provide evidence that connecting and nonstop markets are relevant to each other, by showing that a connecting entry affects nonstop prices to a considerable extent, and a nonstop entry significantly affects connecting prices as well. The third essay, “Profits and Entry Decisions: The Effect of Southwest Airlines,” looks at how Southwest affects other airlines’ profits and entry decisions. As shown in my second essay, Southwest can lead to significant drops in airfares. Meanwhile, the fare drops are accompanied with dramatic increases in passenger traffic. As a result, it is not clear of whether and how Southwest influences other airlines’ profits and entry decisions. In this essay, I estimate a static game of simultaneous entry closely following Ciliberto and Tamer (2009), and demonstrate that Southwest has a very remarkable, negative impact on the profit functions of other carriers. Subsequently, I break down airlines’ entries into nonstop entries and connecting entries, and find that an airline’s entry decision is determined by its own and each competitor’s presence in both nonstop and connecting markets. Hence, I also confirm that connecting and nonstop markets are related to each other. Finally, by conducting counterfactual experiments, I show that Southwest has a significant influence on the entry decisions of other airlines and the equilibrium number of non-Southwest carriers in a given market.
Author: Daniel McLeod
Publisher:
ISBN:
Category :
Languages : en
Pages : 120
Get Book Here
Book Description
This dissertation contributes to the literature on airline economics in three primary ways. First,it explores the identification of an airline's marginal costs and product demand elasticities through the implications of its network structure and the nature of product differentiation in the industry. Second, it quantifies the welfare effects of consolidation in the airline industry following a significant negative shock to demand. Finally, it examines the shortcomings of the Bertrand-Nash conduct assumption in airline merger simulation analysis and offers a flexible approach that can lead to more accurate predictions of post-merger prices.
Author: Yan Du
Publisher:
ISBN:
Category : Airlines
Languages : en
Pages : 236
Get Book Here
Book Description
This dissertation consists of two essays that address code-sharing alliances in the U.S. domestic airline industry. The first essay examines the economic impact of code-sharing using data from the complementary code-sharing agreement between Southwest and ATA Airlines. This code-share agreement is found to decrease air fares and increase passenger volumes for incumbent firms, while increasing both consumer and producer surplus on code-shared routes to and from the Denver airport. In addition, these markets are found to exhibit characteristics of Bertrand competition, as opposed to previous findings of the less competitive Cournot result in international markets and in other domestic U.S. markets. The second essay employs three alternative econometric models (Generalized Linear Mixed Models (GLIMM), Generalized Estimating Equations (GEE) and Transition Models (TM)) analyze factors that determine whether individual routes remain in or leave a code-share agreement. The code-share alliance between Continental and America West Airlines is used as the case study for this analysis. Empirical results show that routes with higher flight frequencies and higher yields lead to a higher probability of remaining in the code-share agreement. Alliance firms tend to code-share routes where the origin, connecting or destination airport is one of their hub cities or the route is a vacation route. Airport congestion and high route concentration are found to be important barriers that limit use of code-sharing.
Author: Daniel McLeod
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This dissertation contributes to the literature on airline economics in three primary ways. First, it explores the identification of an airline's marginal costs and product demand elasticities through the implications of its network structure and the nature of product differentiation in the industry. Second, it quantifies the welfare effects of consolidation in the airline industry following a significant negative shock to demand. Finally, it examines the shortcomings of the Bertrand-Nash conduct assumption in airline merger simulation analysis and offers a flexible approach that can lead to more accurate predictions of post-merger prices.
Author: Zhe Yuan
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This thesis studies the network structure and network competition (Chapter 1), strategic entry deterrence (Chapter 2) and demand (Chapter 3) in the airline industry. Chapter 3 extends the pricing competition stage in Chapter 1 and estimates a structural model of demand and price competition. However, both Chapters 1 and 3 ignore the entry deterrence motives of the airlines which are analyzed in Chapter 2. The first chapter studies network competition in the US airline industry. I propose a structural model of oligopoly competition where the set of endogenous strategic decisions of an airline includes its network structure (i.e., the set of city-pairs where the airline operates nonstop flights), capacities (i.e., flight frequency and number of seats) for every city-pair where they are active, and prices for nonstop and one-stop routes. In this paper, I propose and implement simple methods for the estimation of the model and for the evaluation of counterfactual experiments that avoid the computation of an equilibrium. The estimation of the model shows that ignoring the endogenous network structure in this industry implies a substantial downward bias in the estimates of marginal revenues and marginal cost of capacity. The estimated model is used to evaluate the effects of the counterfactual entry of JetBlue into the segment between Atlanta and New York. I find that the JetBlue entry into this city-pair (segment) would have substantial competition effects in other city-pairs, even in those that that are not directly connected to Atlanta or New York. The second chapter empirically studies three different but not mutually exclusive hypotheses on entry deterrence that have been proposed to explain the observed patterns of airline entry-exit decisions in city-pair markets. The first hypothesis establishes that the dominant positions of an airline in an airport can help to deter entry. The second hypothesis is based on product proliferation: an incumbent airline may want to provide more differentiated products (schedules) in order to lower the potential profitability of its competitors. The third hypothesis establishes that a hub-and-spoke network can be an effective mechanism to deter entry in spoke markets. I propose an approach to empirically distinguish the contribution of these hypotheses to explain airline entry and exit decision in city-pair markets. My results are based on new measures from combining of two U.S. Department of Transportation databases: DB1B and T100. I construct and estimate a structural entry game with incomplete information, and use the estimated model to separate the contributions of these three hypotheses. I find empirical evidence for all of the three hypotheses. The third chapter studies how different network structures and flight frequencies affect consumer willingness-to-pay and airline ability to serve passengers, for both nonstop and one-stop services. In this paper, I propose and construct new measures of airline flight frequencies in each of nonstop and one-stop service. I consider a discrete choice demand model where airlines' flight frequencies and hub status enter into consumer utility. I separate the contribution of these two product characteristics: airline flight frequencies and airline hubs indexes on consumer willingness-to-pay and marginal cost of serving passengers. My empirical findings show that when nonstop flight frequency of an airline increases by one daily flight, average consumer utility increases by $9. When one-stop flight frequency of an airline increases by one unit, average willingness-to-pay by $2.4. Although scheduling additional flights is costly for airlines, I find that, in addition to the positive effect it has on consumer demand, it also reduces the marginal cost of serving passengers. My estimates show that an increase in flight frequency by one daily flight implies reductions of $1.6 and $0.4 in the marginal cost of serving nonstop passengers and one-stop passengers, respectively.
Author: Zexuan Liu
Publisher:
ISBN:
Category : Aeronautics, Commercial
Languages : en
Pages : 186
Get Book Here
Book Description
