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ENTRY DETERRENCE AND STRATEGIC ALLIANCES
Author(s) -
Gayle Philip G.,
Xie Xin
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12559
Subject(s) - deterrence theory , barriers to entry , alliance , industrial organization , strategic alliance , business , economics , deterrence (psychology) , market structure , international economics , physics , law and economics , political science , nuclear physics , law
Researchers have written extensively on the impact that strategic alliances between airlines have on airfare, but little is known of the market entry deterrent impact of strategic alliances. Using a structural econometric model, this paper examines the market entry deterrent impact of codesharing, a form of strategic alliance, between incumbent carriers in domestic air travel markets. We find evidence of market entry deterrence, but deterrence impact depends on the specific type of codesharing between market incumbents as well as the identity of the potential entrant. We quantify the extent to which market incumbents' codesharing influences potential entrants' market entry cost and probability of market entry. ( JEL L13, L93)