Strategic airline alliances and endogenous Stackelberg equilibria |
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| Affiliation: | 1. Department of Business Administration, Hong Kong Shue Yan University, Brae-mar Hill Road, North Point, Hong Kong;2. Business School, Collaborative Innovation Centre for State-owned Assets Administration, Beijing Technology and Business University. No. 33 of Fucheng Road, Haidian District, Beijing 100084, China;1. School of International Trade and Economics, University of International Business and Economics, Beijing, China;2. Sauder School of Business, University of British Columbia, Vancouver, BC, Canada;3. Sauder School of Business, University of British Columbia, Vancouver, BC, Canada;4. School of Economics and Management, Anhui Normal University, Wuhu 241000, China;1. School of Economics and Management, Beihang University, China;2. MoE Key Laboratory of Complex System Analysis and Management Decision, China;3. School of International Trade and Economics, University of International Business and Economics, China;4. Sauder School of Business, University of British Columbia, Canada |
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| Abstract: | This paper analyzes the economic effects of the code-sharing alliances between an international and a domestic airline. If these two allied airlines and a separate unallied international airline endogenously choose the role of fare-leader or fare-follower, two types of Stackelberg equilibria exist. This finding suggests that the Stackelberg solution seems reasonable, and provides a guideline for the airlines’ role-choosing. Furthermore, although this complementary alliance improves the social welfare, it decreases the consumer surplus of the direct international passengers and may decrease that of the direct domestic passengers. The negative effects should also be considered when governments evaluate a complementary alliance. |
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