A Cournot model for analysing the effects of an open skies agreement |
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Affiliation: | 1. Faculdade de Economia, Universidade do Porto, Portugal;1. Latin American Center for Transportation Economics, Aeronautics Institute of Technology, Brazil;2. Institute for Applied Economic Research, Brazil;3. Federal University of São Paulo, Brazil;1. Department of Geography, Rovira i Virgili University, Catalonia, Spain;2. Irstea, UR DTGR, France;3. Nottingham University, Nottingham, UK;4. Business School, Nottingham University, Nottingham, UK;1. College of Air Traffic Management, Civil Aviation University of China, Tianjin 300300, China;2. Airport Operation Center, Changsha Huanghua International Airport, Changsha 410141, China;3. Tianjin Station of Air Traffic Management, Tianjin 300300, China |
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Abstract: | In the last decades there has been a gradual liberalisation of international air transport markets through the implementation of open skies agreements which seek the deregulation of the air transport industry and consequently the functioning of the market in a freer way. The objective of this work is to study the effects of an open skies agreement in order to understand if the airlines and the consumers will benefit after the market deregulation. With this purpose, we develop a Cournot model to compare the initial situation (without agreement) and the situation after the implementation of the open skies agreement.Based on the model developed we conclude that after market liberalisation the prices on international market segments where competition increases should decline, thus benefiting consumers. Regarding the incumbent airlines in the market, an open skies agreement should jeopardize the airlines that fail to operate new routes, leading to decreased profits. |
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Keywords: | Open skies agreement Cournot model Effects on prices Firms' profits D43 D21 |
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