Empirical Analysis of Inter‐Firm Rivalry between Japanese Full‐Service and Low‐Cost Carriers
17 Pages Posted: 8 Feb 2011
Date Written: February 2011
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.
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