Price and demand behaviors in the Scandinavian airline industry following market liberalization

Abstract

This paper examines the airline competition after liberalization through an empirical specification of a demand and pricing equation system. The system is estimated for the Scandinavian (Denmark, Norway, and Sweden) domestic airline market using a simultaneous-equations procedure. The purpose of this study is to gather the various reactions of the industry players and determine whether the competition model after liberalization, by studying routes covering 95% of these types of connections operated in this market. This study focuses on the mobility of same-day business travel passengers. This model, based on over 161 routes and over 56 fortnights from 2013 to 2015, allowed for the creation of a data panel intended to show whether or not the pattern of behavior in this market can be explained by the main oligopoly models. By estimating elasticities and analyzing behaviors in the airline market, this research can be helpful to transport authorities and airlines.