Frequency Competition and Environmental Costs: An Application to European Air Transport Liberalization

J.Y. Schipper; P. Rietveld; P. Nijkamp

doi:10.1016/j.seps.2006.05.001

Frequency Competition and Environmental Costs: An Application to European Air Transport Liberalization

J.Y. Schipper, P. Rietveld, P. Nijkamp

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

In this paper, we analyze symmetric frequency equilibria in airline markets; these equilibria are derived as multiproduct oligopoly solutions in a spatial competition model. Competitive equilibria are compared with a regulated equilibrium; in order to assess the welfare implications of European air transport liberalization, we compute numerical solutions using data for 21 regulated European interstate routes in 1990. We conclude that, following the introduction of competition in these markets, consumer welfare is significantly higher due to frequency increases and fare decreases. Profits decrease and, as a result of higher departure frequencies, environmental costs increase. However, the gains in consumer welfare more than compensate the decrease in profits and the rise in environmental costs. © 2006 Elsevier Ltd. All rights reserved.

Original language	English
Pages (from-to)	208-223
Number of pages	16
Journal	Socio-Economic Planning Sciences
Volume	41
Issue number	3
DOIs	https://doi.org/10.1016/j.seps.2006.05.001
Publication status	Published - 2007

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title = "Frequency Competition and Environmental Costs: An Application to European Air Transport Liberalization",

abstract = "In this paper, we analyze symmetric frequency equilibria in airline markets; these equilibria are derived as multiproduct oligopoly solutions in a spatial competition model. Competitive equilibria are compared with a regulated equilibrium; in order to assess the welfare implications of European air transport liberalization, we compute numerical solutions using data for 21 regulated European interstate routes in 1990. We conclude that, following the introduction of competition in these markets, consumer welfare is significantly higher due to frequency increases and fare decreases. Profits decrease and, as a result of higher departure frequencies, environmental costs increase. However, the gains in consumer welfare more than compensate the decrease in profits and the rise in environmental costs. {\textcopyright} 2006 Elsevier Ltd. All rights reserved.",

author = "J.Y. Schipper and P. Rietveld and P. Nijkamp",

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AB - In this paper, we analyze symmetric frequency equilibria in airline markets; these equilibria are derived as multiproduct oligopoly solutions in a spatial competition model. Competitive equilibria are compared with a regulated equilibrium; in order to assess the welfare implications of European air transport liberalization, we compute numerical solutions using data for 21 regulated European interstate routes in 1990. We conclude that, following the introduction of competition in these markets, consumer welfare is significantly higher due to frequency increases and fare decreases. Profits decrease and, as a result of higher departure frequencies, environmental costs increase. However, the gains in consumer welfare more than compensate the decrease in profits and the rise in environmental costs. © 2006 Elsevier Ltd. All rights reserved.

U2 - 10.1016/j.seps.2006.05.001

DO - 10.1016/j.seps.2006.05.001

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