Airbus Versus Boeing Revisited: International Competition in the Aircraft Market

50 Pages Posted: 13 Jun 2003

See all articles by Douglas A. Irwin

Douglas A. Irwin

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Nina Pavcnik

Dartmouth College - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2003

Abstract

This Paper examines international competition in the commercial aircraft industry. We estimate a discrete choice, differentiated products demand system for wide-body aircraft and examine the Airbus-Boeing rivalry under various assumptions on firm conduct. We then use this structure to evaluate two trade disputes between the United States and European Union. Our results suggest that aircraft prices increased by about 3.7% after the 1992 US-EU agreement on trade in civil aircraft that limits subsidies. This price hike is consistent with a 5% increase in firms' marginal costs after the subsidy cuts. We also simulate the impact of the future entry of the Airbus A-380 super-jumbo aircraft on the demand for other wide-bodied aircraft, notably the Boeing 747. We find that the A-380 could reduce the market share of the 747 by up to 14.8 percentage points in the long range wide-body market segment (depending upon the discounts offered on the A-380), but would reduce the market for Airbus's existing wide-bodies by an even greater margin.

Keywords: Trade policy, aircraft industry

JEL Classification: F12, F13, L13

Suggested Citation

Irwin, Douglas A. and Pavcnik, Nina, Airbus Versus Boeing Revisited: International Competition in the Aircraft Market (April 2003). CEPR Discussion Paper No. 3876. Available at SSRN: https://ssrn.com/abstract=413500

Douglas A. Irwin (Contact Author)

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Hall
Hanover, NH 03755
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603-646-2942 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

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Nina Pavcnik

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Hall
Hanover, NH 03755
United States
603-646-2537 (Phone)
603-646-2122 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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