Hub location in the South-Atlantic airline market ☆: A spatial competition game

The paper analyzes the airlines' hub location problem through a spatial competition game played in two stages. First, airlines sequentially choose the location of their hub and second, they compete offering direct or connecting services between each city-pair. Different outcomes in the first stage will affect competition in the second, and as a consequence, the market share that airlines can obtain. Given actual demand patterns, results of the model are applied to the South-Atlantic airline market. We study the subgame perfect equilibriums obtained as a result of competition in each city-pair to anticipate where airlines will probably locate their hubs once an "open skies" policy is adopted in this market.

[1]  John Black,et al.  HUB-AND-SPOKE NETWORKS AND THE INCLUSION OF ENVIRONMENTAL COSTS ON AIRPORT PRICING , 1998 .

[2]  E. Prescott,et al.  Sequential location among firms with foresight , 1977 .

[3]  Concepción Román,et al.  NEW POTENTIAL HUBS IN THE SOUTH-ATLANTIC MARKET: A PROBLEM OF LOCATION , 2003 .

[4]  D. Stasinopoulos.  The second aviation package of the European Community. , 1992 .

[5]  Kenneth Button,et al.  High-technology employment and hub airports , 1999 .

[6]  Robert Gibbons,et al.  A primer in game theory , 1992 .

[7]  D Vincent,et al.  THE AVIATION POLICY OF THE EUROPEAN COMMUNITY , 1990 .

[8]  Tae Hoon Oum,et al.  AIRLINE HUB AND SPOKE SYSTEMS , 1990 .

[9]  Fariba Alamdari,et al.  Passengers' choice of airline under competition: the use of the logit model. , 1992 .

[10]  Jan K. Brueckner,et al.  A MODEL OF SCHEDULING IN AIRLINE NETWORKS: HOW A HUB-AND-SPOKE SYSTEM AFFECTS FLIGHT FREQUENCY, FARES AND WELFARE , 2001 .

[11]  Nicole Adler,et al.  Competition in a deregulated air transportation market , 2001, Eur. J. Oper. Res..

[12]  Severin Borenstein,et al.  The Dominant-Firm Advantage in Multiproduct Industries: Evidence from the U. S. Airlines , 1991 .

[13]  Nigel Dennis,et al.  Airline hub operations in Europe , 1994 .

[14]  A. Kanafani,et al.  AIRLINE HUBBING : SOME IMPLICATIONS FOR AIRPORT ECONOMICS , 1985 .

[15]  Pat Hanlon,et al.  Global Airlines: Competition in a transnational industry , 1996 .

[16]  Michael E. Levine,et al.  AIRLINE COMPETITION IN DEREGULATED MARKETS: THEORY, FIRM STRATEGY, AND PUBLIC POLICY , 1987 .

[17]  S. Borenstein.  Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry , 1989 .

[18]  Mark Hansen,et al.  Airline competition in a hub-dominated environment: An application of noncooperative game theory , 1990 .

[19]  Steven Berry,et al.  Airport Presence as Product Differentiation , 1990 .

[20]  Harvey J. Miller,et al.  THE HUB NETWORK DESIGN PROBLEM: A REVIEW AND SYNTHESIS. , 1994 .

[21]  M. O'Kelly,et al.  A quadratic integer program for the location of interacting hub facilities , 1987 .

[22]  D. Stasinopoulos,et al.  THE THIRD PHASE OF LIBERALISATION IN COMMUNITY AVIATION AND THE NEED FOR SUPPLEMENTARY MEASURES. , 1993 .

[23]  Kenneth Button,et al.  Flying into the Future: Air Transport Policy in the European Union , 1998 .

[24]  Clifford Winston,et al.  The Evolution of the Airline Industry , 1994 .

[25]  Gang Yu,et al.  AIRLINE NETWORK DESIGN AND HUB LOCATION PROBLEMS , 1996 .

[26]  J H Huston,et al.  AIRLINE SERVICE TO NON-HUB AIRPORTS TEN YEARS AFTER DEREGULATION , 1990 .

[27]  A. Zhang,et al.  Airline Network Rivalry , 1995 .

[28]  S. Mcshan,et al.  THE IMPLICATIONS OF HUB-AND-SPOKE ROUTING FOR AIRLINE COSTS AND COMPETITIVENESS , 1989 .

[29]  D. Stasinopoulos,et al.  Developments in transport policy: the aviation policy of the European Community. , 1990 .

[30]  L. R. Christensen,et al.  Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ , 1984 .

[31]  Thomas J. Zlatoper,et al.  U.S. Air Passenger Service: a Taxonomy of Route Networks, Hub Locations, and Competition , 1998 .

[32]  Nicole Adler,et al.  Evaluating optimal multi-hub networks in a deregulated aviation market with an application to Western Europe , 2001 .

[33]  Dominique Peeters,et al.  Location on networks , 1992 .

[34]  Patrick T. Harker,et al.  Air traffic network equilibrium: Toward frequency, price and slot priority analysis , 1992 .

[35]  Richard A. Posner,et al.  Benefits and Costs of Airline Mergers: A Case Study , 1980 .