Abstract
A questionnaire-based survey is applied to investigate the perception of mobilitybarriers by European airline managers. Whilst the liberalisation of Europe's airline markets removed regulatory mobility barriers, we find that mobility impediments still appear to exist. Potential entrants moreover, perceive some mobility barriers as significantly more effective than others. The perceived effectiveness of a particular mobility barrier varies considerably among airline managers. We also provide an overview of previous studies on the contestability hypothesis and the effectiveness of endogenous (strategic) mobility barriers. Our results support earlier findings for the U.S. to the effect that barriers to mobility are perceived to exist and matter. Whilst our results are clearly subjective, as they are based on the perceptions of managers, we believe such perceptions matter as they inform managerial actions. In this sensewe believe our results are of value.
Similar content being viewed by others
References
ABC World Airways Guide (1998) No. 763, January. Published by Reed Travel Group.
Aviation Internet Resources (1998) Airline Web Sites-European Airlines. Was available at: http://www.air-online.com. This internet page is out of service.
Bailey, E. E., and J. C. Panzar (1981) ‘The Contestability of Airline Markets during the Transition to Deregulation’, Law and Contemporary Problems, 44, 125–145.
Bailey, E. E., and J. R. Williams (1988) ‘Sources of Economic Rent in the Deregulated Airline Industry’, Journal of Law and Economics, 31, 173–202.
Bailey, E. E., D. R. Graham, and D. P. Kaplan (1985) Deregulating the Airlines. Cambridge, MA: MIT Press.
Bain, J. S. (1956) Barriers to New Competition. Cambridge, MA: Harvard University Press.
Baker, S. H., and J. B. Pratt (1989) ‘Experience as a Barrier to Contestability in Airline Markets’, Review of Economics and Statistics, 71, 352–356.
Bauer, P. W. (1987) ‘Competition, Concentration, and Fares in the U.S. Airline Industry’, Economic Commentary, September 15, pp. 1–4.
Baumol, W. J. (1982) ‘Contestable Markets: An Uprising in the Theory of Industry Structure’, American Economic Review, 72, pp. 1–15.
Beesley, M. E. (1986) ‘Commitment, Sunk Costs, and Entry to the Airline Industry-Reflections on Experience’, Journal of Transport Economics and Policy, 20, 173–190.
Borenstein, S. (1989) ‘Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry’, RAND Journal of Economics, 20, 344–365.
Borenstein, S. (1990) ‘Dissipating the Airline Deregulation Dividend’, Regulation, 13, 69–77.
Bunch, D. S., and R. Smiley (1992) ‘Who Deters Entry? Evidence on the Use of Strategic Entry Deterrents’, Review of Economics and Statistics, 74, 509–521.
Butler, R. V., and J. H. Huston (1989) ‘How Contestable Are Airline Markets?’, Atlantic Economic Journal, 17, 27–35.
Caves, D. W., L. R. Christensen, and M. W. Tretheway (1984) ‘Economics of Density versus Economics of Scale: Why Trunk and Local Service Airline Costs Differ’, RAND Journal of Economics, 15, 471–489.
Comanor, W. S., and T. S. Wilson (1967) ‘Advertising, Market Structure and Performance’, Review of Economics and Statistics, 49, 423–440.
Dixit, A. (1980) ‘The Role of Investment in Entry-Deterrence’, Economic Journal, 90, 95–106.
Duncan, R. (1972) ‘Characteristics of Organizational Environments and Perceived Environmental Uncertainty’, Administrative Science Quarterly, 17, 313–327.
Gruca, T. S., and D. Sudharshan (1995) ‘A Framework for Entry Deterrence Strategy: The Competitive Environment, Choices, and Consequences’, Journal of Marketing, 59, 44–55.
Hanlon, J. P. (1996) Global Airlines: Competition in a Transnational Industry. Oxford: Butterworth Heinemann.
Huston, J. H., and R. V. Butler (1993) ‘Airline Hubs in the Single European Market: A Benchmark Analysis’, Review of Industrial Organization, 8, 407–417.
Joesch, J. M., and C. D. Zick (1994) ‘Evidence of Changing Contestability in Commercial Airline Markets during the 1980s’, Journal of Consumer Affairs, 28, 1–24.
Kahn, A. E. (1993) ‘The Competitive Consequences of Hub Dominance: A Case Study’, Review of Industrial Organization, 8, 381–405.
Karakaya, F., and M. J. Stahl (1989) ‘Barriers to Entry and Market Entry Decisions in Consumer and Industrial Goods Markets’, Journal of Marketing, 53, 80–91.
Knieps, G. (1987) Deregulierung im Luftverkehr: neuere Entwicklungen in der Wettbewerbstheorie und ihre Auswirkungen im Linienverkehr. Tübingen: Mohr.
Kreps, D., and R. Wilson (1982) ‘Reputation and Imperfect Information’, Journal of Economic Theory, 27, 253–279.
Levine, M. E. (1987) ‘Airline Competition in Deregulated Markets: Theory, Firm Strategy, and Public Policy’, Yale Journal on Regulation, 4, 393–494.
Lieberman, M. B. (1987) ‘Excess Capacity as a Barrier to Entry: An Empirical Appraisal’, Journal of Industrial Economics, 35, 607–627.
McGee, J. (1958) ‘Predatory Price Cutting: The Standard Oil (N.J.) Case’, Journal of Law and Economics, 1, 137–169.
McGee, J. (1980) ‘Predatory Pricing Revisited’, Journal of Law and Economics, 23, 289–330.
McShan, S., and R. Windle (1989) ‘The Implication of Hub-and-Spoke Routing for Airline Costs and Competitiveness’, Logistics and Transportation Review, 25, 209–230.
Milgrom, P., and J. Roberts (1982) ‘Predation, Reputation and Entry Deterrence’, Journal of Economic Theory, 27, 280–312.
Modigliani, F. (1958) ‘New Developments on the Oligopoly Front’, Journal of Political Economy, 66, 215–232.
Nelson, R. R. (1991) ‘Why Do Firms Differ, and How Does It Matter?’, Strategic Management Journal, 12, 61–74.
Nero, G. (1996) ‘A Structural Model of Intra European Union Duopoly Airline Competition’, Journal of Transport Economics and Policy, 30, 137–155.
Oster, C. V., and D. H. Pickrell (1986) ‘Marketing Alliances and Competitive Strategy in the Airline Industry’, Logistics and Transportation Review, 22, 371–387.
Oum, T. H., and M. W. Tretheway (1990) ‘Airline Hub and Spoke Systems’, Journal of Transportation Research Forum, 30, 380–393.
Oum, T. H., A. Zhang, and Y. Zhang (1995) ‘Airline Network Rivalry’, Canadian Journal of Economics, 28, 836–857.
Paine, F. T., and C. R. Anderson (1977) ‘Contingencies Effecting Strategy Formulation and Effectiveness: An Empirical Study’, Journal of Management Studies, 14, 147–158.
Penrose, E. T. (1959) The Theory of the Growth of the Firm. Oxford: Oxford University Press, 3rd ed., 1995.
Porter, M. (1980) ‘Industry Structure and Competitive Strategy: Keys to Profitability’, Financial Analysis Journal, 36, 30–41.
Rosenbaum, D. I. (1993) ‘Profit, Entry and Changes in concentration’, International Journal of Industrial Organization, 11, 185–203.
Saunders, L. F., and W. G. Shepherd (1993) ‘Airlines: Setting Constraints on Hub Dominance’, Logistics and Transportation Review, 29, 201–220.
Scherer, F. M. (1970) Industrial Pricing: Theory and Evidence. Chicago: University of Chicago Press.
Schnell, M. C. A. (1998) Entry Barriers into the European Civil Aviation Markets: Theory and New Evidence, mimeo, University of Cambridge, U.K.
Shapiro, C. (1989) ‘Theories of Oligopoly behavior’, in R. Schmalensee and R. Willig, eds., Handbook of Industrial Organization., Vol. 1. Amsterdam: North-Holland, pp. 329–414.
Shepherd, W. G. (1997) The Economics of Industrial Organization., 4th edn. Upper Saddle River: Prentice-Hall.
Smiley, R. (1988) ‘Empirical Evidence on Strategic Entry Deterrence’, International Journal of Industrial Organization, 6, 167–180.
Spence, M. (1980) ‘Notes on Advertising, Economies of Scale and Entry Barriers’, Quarterly Journal of Economics, 95, 493–507.
Stigler, G. J. (1968) The Organization of Industry. Chicago: University of Chicago Press.
Stubbart, C. I., and A. Ramaprasad (1988) ‘Probing Two Chief Executives Schematic Knowledge of the U.S. Steel Industry Using Cognitive Maps’, Advances in Strategic Management, 5, 139–164.
Sylos-Labini, P. (1962) Oligopoly and Technical Progress. Cambridge, MA: Harvard University Press.
Yip, G. S. (1982) Barriers to Entry: A Corporate Strategy Perspective. Lexington: Lexington Books.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Pitelis, C.N., Schnell, M.C.A. Barriers to Mobility in Europe's Civil Aviation Markets: Theory and New Evidence. Review of Industrial Organization 20, 127–150 (2002). https://doi.org/10.1023/A:1013828420609
Issue Date:
DOI: https://doi.org/10.1023/A:1013828420609