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| Author: | Barla, P. Constantatos, C. |
| Title: | Strategic interactions and airline network morphology under demand uncertainty |
| Journal: | European Economic Review
2005 : APR, VOL. 49:3, p. 703-716 |
| Index terms: | Airlines Competition Capacity Networks Uncertainty Strategy Models |
| Language: | eng |
| Abstract: | The paper examines how strategic interactions affect airline network under demand uncertainty. There is developed a 3-stage duopoly game: at stage 1 airlines determine their network structure (linear vs. hub-and-spoke), at stage 2 they decide on their capacities, and at stage 3 firms compete in quantities. The main feature of the model is that firms have to decide on network structure and capacities while facing demand uncertainty. It is shown that while hubbing is efficient, airlines may choose a linear network for strategic reasons. Furthermore, it is shown that this structure softens competition. |
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