Highlights Measure how firms compete and not only market structure. Develops a measure of Spatial Competition. Illustrate how both market structure and the basis of competition affect prices. Show scheduling affects prices conditional on business models in the market.
Abstract Measuring the degree of competition in markets is important for setting competition and regulatory policies as well as developing management strategies. Commonly used structural indices, such as the HHI, overlook the way in which firms compete and, hence, set their prices in markets. We propose a family of horizontal differentiation measures, which encapsulates firms’ portfolio of products as well as the degree of overlap and substitution between competing services. We term this family of measures Schedule Differentiation Metric or SDM. Applied to aviation markets, we illustrate one instance of SDM and demonstrate the significant importance of SDM in explaining price levels and structure. The information captured by SDM also explains fares across fare percentiles depending on the competing airlines’ business models.
Measuring the impact of scheduling overlap and market structure on prices: Evidence from the airline industry
2024-01-01
Article (Journal)
Electronic Resource
English
Airlines , Competition , HHI , Flight frequency , Product differentiation , L13 , L93 , D22
Hidden prices with fixed inventory: Evidence from the airline industry
Elsevier | 2022
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