[en] Measuring the degree of competition in markets is important for setting competition and regulatory policies as well as developing management strategies. Commonly used structural indices, such as the HHI, overlook the way in which firms compete and, hence, set their prices in markets. We propose a family of horizontal differentiation measures, which encapsulates firms’ portfolio of products as well as the degree of overlap and substitution between competing services. We term this family of measures Schedule Differentiation Metric or SDM. Applied to aviation markets, we illustrate one instance of SDM and demonstrate the significant importance of SDM in explaining price levels and structure. The information captured by SDM also explains fares across fare percentiles depending on the competing airlines’ business models.
Precision for document type :
Review article
Disciplines :
Production, distribution & supply chain management
Author, co-author :
MANTIN, Binyamin ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM) > LCL
Gillen, David ; Sauder School of Business, University of British Columbia, Vancouver, Canada
Delibasi, Tuba Toru; NERA Economic Consulting, London, United Kingdom
External co-authors :
yes
Language :
English
Title :
Measuring the impact of scheduling overlap and market structure on prices: Evidence from the airline industry
Publication date :
May 2024
Journal title :
Transportation Research. Part A, Policy and Practice
We are indebted to Tom Ross for their helpful comments and suggestions. We thank the seminar participants at the Indian Institute for Management 2022, Southern Economic Association 2021 Conference, CRESSE 2018 conference, ATARD 2018 workshop, TSTE Conference 2018 Beijing-Jiaotong University and Bristol IO Workshop 2017. We are also indebted to two anonymous referees for suggestions that greatly improved the paper.
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