A platform for research: civil engineering, architecture and urbanism
A platform for research: civil engineering, architecture and urbanism
Contestability and public concern about airfares: A case study in the Canary Islands
Abstract This paper studies – both from a theoretical and empirical perspective – a case of contestability in the Canary Islands' domestic air transport market. We show how after the exit of its rival in an initially duopolistic market, the remaining airline did not increase its prices in order not to provoke the entry of new rivals. According to our view, this result was explained by the ‘public concern’ that was created about the incumbent's behaviour and its attempt of presenting itself as a benevolent monopolist. However, its strategy failed and a new operator finally entered the market, with a subsequent drop in average prices. We prove our hypothesis by developing a theoretical multi-route oligopolistic model with differentiated services and by testing its implications using several difference-in-difference econometric techniques on a monthly prices database collected in 2012–2013.
Highlights A contestability case study in the Canary Islands' domestic air transport market. When an airline exited the market, the incumbent did not increase its fares. Our hypothesis: this result also reflects ‘public concern’ pressure about prices. To verify this idea we use both theoretical and empirical models. .Methodology: difference-in-difference on a monthly prices database 2012-2013 Results confirm the relevance of public concern, discarding alternative explanations.
Contestability and public concern about airfares: A case study in the Canary Islands
Abstract This paper studies – both from a theoretical and empirical perspective – a case of contestability in the Canary Islands' domestic air transport market. We show how after the exit of its rival in an initially duopolistic market, the remaining airline did not increase its prices in order not to provoke the entry of new rivals. According to our view, this result was explained by the ‘public concern’ that was created about the incumbent's behaviour and its attempt of presenting itself as a benevolent monopolist. However, its strategy failed and a new operator finally entered the market, with a subsequent drop in average prices. We prove our hypothesis by developing a theoretical multi-route oligopolistic model with differentiated services and by testing its implications using several difference-in-difference econometric techniques on a monthly prices database collected in 2012–2013.
Highlights A contestability case study in the Canary Islands' domestic air transport market. When an airline exited the market, the incumbent did not increase its fares. Our hypothesis: this result also reflects ‘public concern’ pressure about prices. To verify this idea we use both theoretical and empirical models. .Methodology: difference-in-difference on a monthly prices database 2012-2013 Results confirm the relevance of public concern, discarding alternative explanations.
Contestability and public concern about airfares: A case study in the Canary Islands
Campos, Javier (author) / Jiménez, Juan Luis (author) / Perdiguero, Jordi (author)
Transport Policy ; 42 ; 180-186
2015-06-09
7 pages
Article (Journal)
Electronic Resource
English
Contestability and public concern about airfares: A case study in the Canary Islands
| Online Contents | 2015
Estimating passenger emissions from airfares supports equitable climate action
| DOAJ | 2023
Presidency Building, Canary Islands
| British Library Online Contents | 2001
The effect of low fare air carriers on airfares in the US
| Online Contents | 2000