The purpose of this research is to
investigate the dynamic changes in the competition between air carriers by
applying a revised conduct parameter method. We examine the cases of
Southwest Airlines and America West Airlines due to the availability of data. Our
interestsare in what fashion a low-cost carrier entered the market, how the
rival reacted, and whether the fashions of competition between two types of air
carrier remained stable as time passed. Our empirical results show that the
fashions of competition fell between Cournot and “P=MC”
competition, and competitive fashions were sometimes stable but sometimes not.
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