Highlights A certain degree of market power is found to exist in the Chinese airline industry. China’s three dominant carriers exhibit different levels of market power. The extent of market power varies significantly among regional markets. The determinants of Chinese airlines’ market power are investigated.
Abstract This paper first measures the degree of Chinese airlines’ market power by using Lerner index, and then investigates its determinants. Our empirical results show that a certain degree of market power exists in the Chinese airline industry. Of the three dominant carriers, Air China exhibits the strongest market power whereas China Eastern Airlines the weakest, with China Southern Airlines being in the middle. Furthermore, the extent of market power varies significantly among regional markets, with China’s northeast region as the strongest, followed by the eastern and western regions, and the central area as the weakest. We also find a hub-premium effect similar to the result found in the US airline market. Our analysis shows that the existence of high-speed rail and low-cost carriers, income level, population size, seasonality, and number of competing airlines are the main determinants of competition in the Chinese airline market.
Market power and its determinants in the Chinese airline industry
2014-03-13
13 pages
Article (Journal)
Electronic Resource
English
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