Measuring competition in civil aviation

Markets in civil aviation are characterized by large differences in the level of competition, both between time periods as between regions. To measure competition, several indicators are available, such as the number of competitors, the C4-index and the Herfindahl index. We use these measures in simulations of events that influence the level of competition, such as growing market shares, entry and merger. We find that there are events where different measures lead to different outcomes, not only in magnitude but also in sign. Competition indicators should be used with caution and attention should be devoted to the definition of the market and the importance of imperfect substitutes. The simultaneous use of several indicators, along with economic intuition and common sense reduces the risks involved. © 2002 Elsevier Science Ltd. All rights reserved.