Congestion and Market Structure in the Airline Industry
|Authors:||Ater, Itai - Stanford University|
|Keywords:||Congestion; Air Transportation|
|Series/Report no.:||NET Institute Working Paper;07-28|
|Abstract:||Empirical research on the relationship between market congestion and the market competitive level largely falsifies the positive relationship predicted by theoretical models. In this paper, I exploit the airline industry network structure and focus on the level of congestion during periods in which passengers cross-connect to their final destinations. About 70% of hub airport flights depart or land during these periods. The empirical analysis establishes a strong positive relationship. Furthermore, based on a simple theoretical model, I am able to quantify the potential time savings from eliminating congestion externalities and find that, on average, a flight can save 2 minutes of flight time at its departing airport and another 1.5 minutes at its destination airport. I also find that airlines choose to pad their schedule particularly on competitive routes, presumably to attract uninformed passengers.|
|Appears in Collections:||NET Institute Working Papers Series|
Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.