The Determinants of Pricing in the Mexican Domestic Airline Sector: The Impact of Competition and Airport Congestion

The Determinants of Pricing in the Mexican Domestic Airline Sector: The Impact of Competition and... Low-cost airlines in Mexico affect the lowest-quoted fares of one of the two principal incumbent carriers, but have no effect on the lowest-quoted fares of the other incumbent carrier. The same conclusion holds for competition between incumbent carriers where the lowest-quoted fares of one of the incumbent carriers is lower when incumbents compete. Congestion at the Mexico City airport is limiting potential competition, with carriers being able to charge a significant price premium. This suggests that the societal costs of airport congestion can go well beyond the negative congestion externality and should also include the effects of reduced competition. These findings raise important public policy issues. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Determinants of Pricing in the Mexican Domestic Airline Sector: The Impact of Competition and Airport Congestion

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Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-011-9276-x
Publisher site
See Article on Publisher Site

Abstract

Low-cost airlines in Mexico affect the lowest-quoted fares of one of the two principal incumbent carriers, but have no effect on the lowest-quoted fares of the other incumbent carrier. The same conclusion holds for competition between incumbent carriers where the lowest-quoted fares of one of the incumbent carriers is lower when incumbents compete. Congestion at the Mexico City airport is limiting potential competition, with carriers being able to charge a significant price premium. This suggests that the societal costs of airport congestion can go well beyond the negative congestion externality and should also include the effects of reduced competition. These findings raise important public policy issues.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 29, 2011

References

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