Vertical relations in the air transport industry: A facility-rivalry game |
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| Authors: | Tiziana D’Alfonso Alberto Nastasi |
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| Institution: | 1. Department of Computer, Control and Management Engineering, Sapienza Università di Roma, Via Ariosto 25, 00185 Rome, Italy;2. Department of Economics and Technology Management, University of Bergamo, Viale Marconi 5, 24044 Dalmine, BG, Italy;3. ICCSAI – International Center for Competitiveness Studies in the Aviation Industry, Via Aeroporto 13, 24050 Orio al Serio, BG, Italy |
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| Abstract: | This paper investigates contracts between airports and airlines, in the context of two competing facilities and three types of agreements. The downstream market consists in a route operated by one leader and n ? 1 followers competing à la Stackelberg in each facility. We develop a multistage game where each airport and its dominant airline decide whether to enter into a contract and which one to engage in. We find that the airport and its dominant airline have incentives to collude in each facility. Nevertheless, the equilibrium is not efficient in terms of social welfare: there is a misalignment between private and social incentives. |
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