The Meaning of Size: Output? Scope? Capacity? The Case of Airline Hubs

The Meaning of Size: Output? Scope? Capacity? The Case of Airline Hubs The “size” of a production facility has different specific meanings depending on the nature of the business decision at issue. We present a general theoretical model illustrating the profit-maximizing firm's interrelated choice of plant size in long-run, medium-run and short-run contexts. The model is then estimated for U.S. airline hubs. The results suggest that competition operates primarily via the capacity (long-run) size decision. A game-theoretic simulation based upon the results is consistent with the argument that the smaller of two hubs sharing an airport is at a significant competitive disadvantage. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Meaning of Size: Output? Scope? Capacity? The Case of Airline Hubs

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007764008391
Publisher site
See Article on Publisher Site

Abstract

The “size” of a production facility has different specific meanings depending on the nature of the business decision at issue. We present a general theoretical model illustrating the profit-maximizing firm's interrelated choice of plant size in long-run, medium-run and short-run contexts. The model is then estimated for U.S. airline hubs. The results suggest that competition operates primarily via the capacity (long-run) size decision. A game-theoretic simulation based upon the results is consistent with the argument that the smaller of two hubs sharing an airport is at a significant competitive disadvantage.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 15, 2004

References

  • Aviation Deregulation in the European Union: Do Actors Learn in the Regulation Game?
    Button, K. J.

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