Airline competition and network structure |
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Authors: | Ricardo Flores-Fillol |
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Affiliation: | aDepartament d’Economia, Universitat Rovira i Virgili, Avinguda de la Universitat 1, 43204 Reus, Spain |
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Abstract: | This paper studies airline networks and their welfare implications in an unregulated environment. Competing airlines may adopt either fully-connected (FC) or hub-and-spoke (HS) network structures; and passengers exhibiting low brand loyalty to their preferred carrier choose an outside option to travel so that markets are partially served by airlines. In this context, carriers adopt hubbing strategies when costs are sufficiently low, and asymmetric equilibria where one carrier chooses a FC strategy and the other chooses a HS strategy may arise. Quite interestingly, flight frequency can become excessive under HS network configurations. |
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Keywords: | Fully-connected networks Hub-and-spoke networks Brand loyalty Fully-served markets Partially-served markets |
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