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Empirical Analysis of Inter‐Firm Rivalry between Japanese Full‐Service and Low‐Cost Carriers

17 Pages Posted: 8 Feb 2011  

Hideki Murakami

Kobe University

Date Written: February 2011

Abstract

This paper empirically analyzes dynamic change in inter‐firm rivalry between Japanese low‐cost carriers (LCC) and full‐service carriers, and deduces the dynamic change in consumer surplus after an LCC enters a market. Our findings are that: (i) the conduct parameters of LCC and reacting full‐service carriers were extraordinarily low when competition started; (ii) the conduct parameters were restored to, or even exceeded, the pre‐entry level in the third year of LCC entry; and (iii) gains in total welfare were recognized for five of the nine markets, whereas in three markets only the airline industry benefited, and in one market, total welfare decreased.

Suggested Citation

Murakami, Hideki, Empirical Analysis of Inter‐Firm Rivalry between Japanese Full‐Service and Low‐Cost Carriers (February 2011). Pacific Economic Review, Vol. 16, Issue 1, pp. 103-119, 2011. Available at SSRN: https://ssrn.com/abstract=1757675 or http://dx.doi.org/10.1111/j.1468-0106.2010.00537.x

Hideki Murakami (Contact Author)

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

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