Working paper

Entry games for the airline industry

Christian Bontemps, and Raquel Menezes Bezerra Sampaio

Abstract

In this paper we review the literature on static entry games and show how they can be used to estimate the market structure of the airline industry. The econometrics challenges are presented, in particular the problem of multiple equilibria and some solutions used in the literature are exposed. We also show how these models, either in the complete information setting or in the incomplete information one, can be estimated from i.i.d. data on market presence and market characteristics. We illustrate it by estimating a static entry game with heterogeneous firms by Simulated Maximum Likelihood on European data for the year 2015.

Keywords

entry, airlines, multiple equilibria, estimation, industrial organization.;

Reference

Christian Bontemps, and Raquel Menezes Bezerra Sampaio, Entry games for the airline industry, TSE Working Paper, n. 20-1108, May 2020.

See also

Published in

TSE Working Paper, n. 20-1108, May 2020