MEASURING CONDUCT AND COST PARAMETERS IN THE SPANISH AIRLINE MARKET

This paper develops a model of airline competition. The model is based on a demand and pricing equation system, which is estimated for the Spanish airline market. The empirical implementation of the equation system relies on a simultaneous rather than a consecutive procedure. I test the explanatory power of alternative oligopoly models with capacity constraints. In addition, I analyze the degree of density economies. Results show that Spanish airlines conduct is less competitive than the Cournot solution. I also find evidence that thin routes can be considered as natural monopolies.