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Airline Schedule Competition and the Entry Route Choices of Low‐Cost Carriers
Author(s) -
Kawasaki Akio,
Lin Ming Hsin
Publication year - 2013
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12011
Subject(s) - low cost carrier , schedule , competition (biology) , business , barriers to entry , free entry , welfare , industrial organization , spoke hub distribution paradigm , microeconomics , economics , transport engineering , marketing , engineering , market structure , market economy , ecology , management , biology
This study investigates the entry route choices of low‐cost carriers ( LCCs ). A LCC considers whether to enter a spoke route or a rim route of a major carrier's hub‐spoke network. Under a C ournot schedule competition model, we demonstrate that rim entry is more profitable for LCCs if connecting passengers' hub‐through additional travel time cost is large, and spoke entry is more profitable if this time cost is small. Welfare analysis shows that rim entry is socially preferable when the time cost is large and that spoke entry is socially preferable when the time cost is small. In a certain range of time costs, however, LCCs choose spoke entry even though it is not socially preferable.