Skip to main content
SpringerLink
Log in

Barriers to Mobility in Europe's Civil Aviation Markets: Theory and New Evidence

  • Published:
Review of Industrial Organization Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

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.

    Google Scholar 

  • 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.

    Google Scholar 

  • Bailey, E. E., D. R. Graham, and D. P. Kaplan (1985) Deregulating the Airlines. Cambridge, MA: MIT Press.

    Google Scholar 

  • Bain, J. S. (1956) Barriers to New Competition. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Google Scholar 

  • Borenstein, S. (1989) ‘Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry’, RAND Journal of Economics, 20, 344–365.

    Google Scholar 

  • Borenstein, S. (1990) ‘Dissipating the Airline Deregulation Dividend’, Regulation, 13, 69–77.

    Google Scholar 

  • 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.

    Google Scholar 

  • Butler, R. V., and J. H. Huston (1989) ‘How Contestable Are Airline Markets?’, Atlantic Economic Journal, 17, 27–35.

    Google Scholar 

  • 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.

    Google Scholar 

  • Comanor, W. S., and T. S. Wilson (1967) ‘Advertising, Market Structure and Performance’, Review of Economics and Statistics, 49, 423–440.

    Google Scholar 

  • Dixit, A. (1980) ‘The Role of Investment in Entry-Deterrence’, Economic Journal, 90, 95–106.

    Google Scholar 

  • Duncan, R. (1972) ‘Characteristics of Organizational Environments and Perceived Environmental Uncertainty’, Administrative Science Quarterly, 17, 313–327.

    Google Scholar 

  • 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.

    Google Scholar 

  • Hanlon, J. P. (1996) Global Airlines: Competition in a Transnational Industry. Oxford: Butterworth Heinemann.

    Google Scholar 

  • 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.

    Google Scholar 

  • 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.

    Google Scholar 

  • Kahn, A. E. (1993) ‘The Competitive Consequences of Hub Dominance: A Case Study’, Review of Industrial Organization, 8, 381–405.

    Google Scholar 

  • 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.

    Google Scholar 

  • Knieps, G. (1987) Deregulierung im Luftverkehr: neuere Entwicklungen in der Wettbewerbstheorie und ihre Auswirkungen im Linienverkehr. Tübingen: Mohr.

    Google Scholar 

  • Kreps, D., and R. Wilson (1982) ‘Reputation and Imperfect Information’, Journal of Economic Theory, 27, 253–279.

    Google Scholar 

  • Levine, M. E. (1987) ‘Airline Competition in Deregulated Markets: Theory, Firm Strategy, and Public Policy’, Yale Journal on Regulation, 4, 393–494.

    Google Scholar 

  • Lieberman, M. B. (1987) ‘Excess Capacity as a Barrier to Entry: An Empirical Appraisal’, Journal of Industrial Economics, 35, 607–627.

    Google Scholar 

  • McGee, J. (1958) ‘Predatory Price Cutting: The Standard Oil (N.J.) Case’, Journal of Law and Economics, 1, 137–169.

    Google Scholar 

  • McGee, J. (1980) ‘Predatory Pricing Revisited’, Journal of Law and Economics, 23, 289–330.

    Google Scholar 

  • 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.

    Google Scholar 

  • Milgrom, P., and J. Roberts (1982) ‘Predation, Reputation and Entry Deterrence’, Journal of Economic Theory, 27, 280–312.

    Google Scholar 

  • Modigliani, F. (1958) ‘New Developments on the Oligopoly Front’, Journal of Political Economy, 66, 215–232.

    Google Scholar 

  • Nelson, R. R. (1991) ‘Why Do Firms Differ, and How Does It Matter?’, Strategic Management Journal, 12, 61–74.

    Google Scholar 

  • Nero, G. (1996) ‘A Structural Model of Intra European Union Duopoly Airline Competition’, Journal of Transport Economics and Policy, 30, 137–155.

    Google Scholar 

  • Oster, C. V., and D. H. Pickrell (1986) ‘Marketing Alliances and Competitive Strategy in the Airline Industry’, Logistics and Transportation Review, 22, 371–387.

    Google Scholar 

  • Oum, T. H., and M. W. Tretheway (1990) ‘Airline Hub and Spoke Systems’, Journal of Transportation Research Forum, 30, 380–393.

    Google Scholar 

  • Oum, T. H., A. Zhang, and Y. Zhang (1995) ‘Airline Network Rivalry’, Canadian Journal of Economics, 28, 836–857.

    Google Scholar 

  • Paine, F. T., and C. R. Anderson (1977) ‘Contingencies Effecting Strategy Formulation and Effectiveness: An Empirical Study’, Journal of Management Studies, 14, 147–158.

    Google Scholar 

  • Penrose, E. T. (1959) The Theory of the Growth of the Firm. Oxford: Oxford University Press, 3rd ed., 1995.

    Google Scholar 

  • Porter, M. (1980) ‘Industry Structure and Competitive Strategy: Keys to Profitability’, Financial Analysis Journal, 36, 30–41.

    Google Scholar 

  • Rosenbaum, D. I. (1993) ‘Profit, Entry and Changes in concentration’, International Journal of Industrial Organization, 11, 185–203.

    Google Scholar 

  • Saunders, L. F., and W. G. Shepherd (1993) ‘Airlines: Setting Constraints on Hub Dominance’, Logistics and Transportation Review, 29, 201–220.

    Google Scholar 

  • Scherer, F. M. (1970) Industrial Pricing: Theory and Evidence. Chicago: University of Chicago Press.

    Google Scholar 

  • Schnell, M. C. A. (1998) Entry Barriers into the European Civil Aviation Markets: Theory and New Evidence, mimeo, University of Cambridge, U.K.

    Google Scholar 

  • 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.

    Google Scholar 

  • Shepherd, W. G. (1997) The Economics of Industrial Organization., 4th edn. Upper Saddle River: Prentice-Hall.

    Google Scholar 

  • Smiley, R. (1988) ‘Empirical Evidence on Strategic Entry Deterrence’, International Journal of Industrial Organization, 6, 167–180.

    Google Scholar 

  • Spence, M. (1980) ‘Notes on Advertising, Economies of Scale and Entry Barriers’, Quarterly Journal of Economics, 95, 493–507.

    Google Scholar 

  • Stigler, G. J. (1968) The Organization of Industry. Chicago: University of Chicago Press.

    Google Scholar 

  • 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.

    Google Scholar 

  • Sylos-Labini, P. (1962) Oligopoly and Technical Progress. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Yip, G. S. (1982) Barriers to Entry: A Corporate Strategy Perspective. Lexington: Lexington Books.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The Judge Institute of Management and Queens' College, University of Cambridge, U.K.

    Christos N. Pitelis & Mirko C. A. Schnell

  2. Centre for Financial Studies, University of Athens, Greece

    Christos N. Pitelis

Authors
  1. Christos N. Pitelis
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mirko C. A. Schnell
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints 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

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1013828420609

Search

Navigation