Price of Airline Frequency Competition
Frequency competition influences capacity allocation decisions in airline markets and has important implications to airline profitability and airport congestion. Market share of a competing airline is a function of its frequency share and the relationship between the two is pivotal for understanding...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
Massachusetts Institute of Technology. Engineering Systems Division
2016
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| Online Access: | http://hdl.handle.net/1721.1/102820 |
| _version_ | 1826192722157895680 |
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| author | Vaze, Vikrant Barnhart, Cynthia |
| author_facet | Vaze, Vikrant Barnhart, Cynthia |
| author_sort | Vaze, Vikrant |
| collection | MIT |
| description | Frequency competition influences capacity allocation decisions in airline markets and has important implications to airline profitability and airport congestion. Market share of a competing airline is a function of its frequency share and the relationship between the two is pivotal for understanding the impacts of frequency competition on airline business. Based on the most commonly accepted form of this relationship, we propose a game-theoretic model of airline frequency competition. We characterize the conditions for existence and uniqueness of a Nash equilibrium for the 2-player case. We analyze two different myopic learning dynamics for the non-equilibrium situations and prove their convergence to Nash equilibrium under mild conditions. For the N-player game between identical players, we characterize all the pure strategy equilibria and identify the worst-case equilibrium, i.e. the equilibrium with maximum total cost. We provide an expression for the measure of inefficiency, similar to the price of anarchy, which is the ratio of the total cost of the worst-case equilibrium to the total cost of the cost minimizing solution and investigate its dependence on different parameters of the game. |
| first_indexed | 2024-09-23T09:28:14Z |
| format | Working Paper |
| id | mit-1721.1/102820 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:28:14Z |
| publishDate | 2016 |
| publisher | Massachusetts Institute of Technology. Engineering Systems Division |
| record_format | dspace |
| spelling | mit-1721.1/1028202019-04-10T10:38:18Z Price of Airline Frequency Competition Vaze, Vikrant Barnhart, Cynthia Frequency competition influences capacity allocation decisions in airline markets and has important implications to airline profitability and airport congestion. Market share of a competing airline is a function of its frequency share and the relationship between the two is pivotal for understanding the impacts of frequency competition on airline business. Based on the most commonly accepted form of this relationship, we propose a game-theoretic model of airline frequency competition. We characterize the conditions for existence and uniqueness of a Nash equilibrium for the 2-player case. We analyze two different myopic learning dynamics for the non-equilibrium situations and prove their convergence to Nash equilibrium under mild conditions. For the N-player game between identical players, we characterize all the pure strategy equilibria and identify the worst-case equilibrium, i.e. the equilibrium with maximum total cost. We provide an expression for the measure of inefficiency, similar to the price of anarchy, which is the ratio of the total cost of the worst-case equilibrium to the total cost of the cost minimizing solution and investigate its dependence on different parameters of the game. 2016-06-02T03:22:48Z 2016-06-02T03:22:48Z 2010-12 Working Paper http://hdl.handle.net/1721.1/102820 en_US ESD Working Papers;ESD-WP-2010-10 application/pdf Massachusetts Institute of Technology. Engineering Systems Division |
| spellingShingle | Vaze, Vikrant Barnhart, Cynthia Price of Airline Frequency Competition |
| title | Price of Airline Frequency Competition |
| title_full | Price of Airline Frequency Competition |
| title_fullStr | Price of Airline Frequency Competition |
| title_full_unstemmed | Price of Airline Frequency Competition |
| title_short | Price of Airline Frequency Competition |
| title_sort | price of airline frequency competition |
| url | http://hdl.handle.net/1721.1/102820 |
| work_keys_str_mv | AT vazevikrant priceofairlinefrequencycompetition AT barnhartcynthia priceofairlinefrequencycompetition |