Incumbent Response to Entry by Low-Cost Carriers in the U.S. Airline Industry

• Autores: Kerry M. Tan
• Localización: Southern Economic Journal, ISSN 0038-4038, ISSN-e 2325-8012, Vol. 82, Nº. 3, 2016, págs. 874-892
• Idioma: inglés
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• Resumen

  • This article studies incumbent price response to entry by low-cost carriers in the U.S. airline industry. I find that legacy carrier incumbents decrease their mean airfare, 10th percentile airfare, and 90th percentile airfare following entry by a low-cost carrier. Airfares decrease by a larger percentage at the right tail of the incumbents’ price distribution than at the left tail, suggesting that increased competition from low-cost carrier entrants leads to lower price dispersion.