Nash equilibrium computation in airline frequency game

Abstract

In many situations, airlines compete for frequency of services which they offer along flight legs due to the limited capacity of airports. In this paper, we study a frequency game in which two airlines offer services along two flight legs. Demand on one leg is considered to be low, while on the other leg demand is considered to be high. We determine the Nash equilibrium strategies of the flight frequency of each of the airlines along each of these legs. In developing countries, there is a need to introduce and promote services along the low demand leg to achieve better connectivity. Our objective is to increase airline connectivity and hence this study aims at analysing the policy of frequency restrictions as a measure to increase flight operations on low demand legs. We study the impact of such frequency restrictions on Nash equilibrium strategies. Our results show that these restrictions increase the number of flight operations on the low demand leg.