UNIVERSITÉ DE GENÈVE

FACULTÉ DES SCIENCES ÉCONOMIQUES ET SOCIALES

Strategic behaviour, barriers to entry and barriers to mobility :

an investigation into the European airline industry from 1993 to 1997

Thèse
présentée à la Faculté des Sciences économiques et sociales
pour obtenir le grade de Docteur ès Sciences économiques et sociales,

mention gestion d'entreprise

par

Hans J. HUBER

sous la direction du
Pr Victoria Curzon Price

Jury :
Pr Fabrizio Carlevaro, président du jury
Pr Xavier Gilbert, IMD Lausanne
Pr Bernard Morard

Thèse n° SES 515

Genève, 2001


      A Marlène Schmid


Abstract

      This paper investigates entry barriers and the way they impact on strategic behavior and pricing in the context of deregulation within the European airline industry. By using contestability theory to approximate a theoretical optimum, identified entry barriers and their impact on prices can be measured. 35 densely traveled city pairs are examined and clusters are formed that define strategic groups according to operational characteristics. Two clusters that were particularly relevant in the context of liberalization are selected: incumbent routes and routes where new service was started. Price changes in these groups were regressed against suspected entry barriers. Hub dominance and excess capacity in flight frequency on such hubs, along with intercontinental flights and, to a lesser extent, control of computer reservation systems were found to explain significant deviations from market contestability within the most competitive price segments. Successful incumbents are able to replace regulatory barriers by economic barriers to entry.


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