Discussion Paper Details

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Title: Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route

Author(s): Victor D Norman and Siri Pettersen Strandenes

Publication Date: March 1990

Keyword(s): Airlines, Competition Policy, Deregulation and European Integration

Programme Area(s): International Trade and Regional Economics

Abstract: The paper develops a numerical simulation model to assess the possible consequences of competition on inter-Scandinavian air routes, using the Oslo-Stockholm route as a case. In the model, demand for air transportation depends on the price and frequency, reflecting consumer preferences for travel and for time of departure. Initially, the market is taken to be an SAS monopoly, so the model is calibrated to estimates of prices and costs, data for demand, and to the first-order conditions for a monopolist. The model is then used to simulate symmetric, non-cooperative many-firm equilibria, described as a simultaneous Bertrand equilibrium in pricing and Cournot equilibrium in the number of flights offered. The simulation experiments indicate very substantial efficiency gains from competition.

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Bibliographic Reference

Norman, V and Strandenes, S. 1990. 'Deregulation of Scandinavian Airlines: A Case Study of the Oslo-Stockholm Route'. London, Centre for Economic Policy Research.