Tuesday, December 14, 2010

City-Pairs v. Airport-Pairs

Blog readers may be interested in reading Jan K. Brueckner et al.'s new paper, City-Pairs vs. Airport-Pairs: A Market-Definition Methodology for the Airline Industry (Oct. 2010) (available here).  From the abstract:

This paper provides a methodology for deciding which airports warrant grouping in multi-airport metropolitan areas. The methodology is based on the comparability of incremental competition effects from nearby airports on average fares at a metropolitan area’s primary airport. Results from a quarterly panel data set for the period 2003-2009 provide strong evidence that city-pairs, rather than airport-pairs, are the appropriate market definition for analyses of passenger air transportation involving many (but not all) large metropolitan areas. Based on the proposed method, we offer a recommended list of airports that should be grouped when creating city-pairs for the analysis of competition in the U.S. domestic airline industry.


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