L13 Oligopoly and Other Imperfect Markets
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- Airline (2)
- Luftverkehrsgesellschaft (2)
- Preisdiskriminierung (2)
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- Alliance <Federation> (1)
- Allianz <Bündnis> (1)
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- Code-Share-Vereinbarung (1)
- Code-share agreement (1)
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Airlines frequently use code-share agreements allowing each other to market seats on flights operated by partner airlines. Regulation may allow code-share agreements with antitrust immunity (cooperative price setting), or without antitrust immunity, or not at all. I compare relative welfare effects of these regulation regimes for complementary airline networks. A crucial point is that such agreements are used to identify and price discriminate interline passengers. I find that interline passengers always benefit from code-share agreements while non-interline passengers are worse off. Furthermore, I show that the second effect questions the overall usefulness of code-share agreements from a welfare perspective.
This paper considers a transport network with two firms that operate a parallel service on a hub-to-hub connection and monopoly services on spoke-to-hub connections under increasing returns to scale. We find the following: A symmetric equilibrium cannot occur under independent (non-cooperative) pricing when the number of spoke-to-spoke passengers becomes positive. The effect of cooperative pricing on mark-ups in spoke-to-hub, hub-to-hub and spoke-to-spoke markets (where double marginalization can occur) can be positive or negative. Cooperation can reduce total welfare though hub-to-hub markets are small.
This paper develops a tractable model of third-degree price discrimination in airline markets that features two types of passengers with different time valuations, carriers in Cournot competition and a congested infrastructure. We find that price discrimination always leads to a loss of social welfare when, in the first stage, the congestion charge is chosen to maximize welfare by incorporating carriers’ behavior in the second stage. We also show that the welfare loss can be small if, in the process of choosing the optimal airport charges, carriers were treated as atomistic.