Abstract

http://ssrn.com/abstract=653003
 
 

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How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines


Austan Goolsbee


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Chad Syverson


University of Chicago Booth School of Business; National Bureau of Economic Research (NBER)

January 2005

NBER Working Paper No. w11072

Abstract:     
We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry). We look specifically at passenger airlines, using the evolution of Southwest Airlines’ route network to identify particular routes where the probability of future entry rises abruptly. We find incumbents cut fares significantly when threatened by Southwest’s entry. Over half of Southwest’s total impact on incumbent fares occurs before Southwest starts flying. These cuts are only on threatened routes, not those out of non-Southwest competing airports. The evidence on whether incumbents are seeking to deter or accommodate entry is mixed.

Number of Pages in PDF File: 32

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Date posted: February 17, 2005  

Suggested Citation

Goolsbee, Austan and Syverson, Chad, How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines (January 2005). NBER Working Paper No. w11072. Available at SSRN: http://ssrn.com/abstract=653003

Contact Information

Austan Goolsbee (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Chad Syverson
University of Chicago Booth School of Business ( email )
1126 East 59th Street
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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