Role Deviations and Rivalry in the U.S. Airline Industry, 1989-2010

Abstract

In this study, we examine how competitive and cooperative dynamics among firms vary according to the extent to which the role structure is threatened by deviations from expected strategic behaviors. We propose that, when a market resembles an orderly role structure, greater rivalry will exist between strategically similar firms within a market. However, when a market’s role structure is threatened by the presence of strategically dissimilar new entrants, markedly different dynamics will unfold. In terms of competitive intensity, we propose role-deviating entrants will create perceptions of heightened threat among market incumbents, leading to greater rivalry among strategically dissimilar firms. We also expect incumbents to attempt to increase their extent of collaboration with similar others as a way of reinforcing and restoring the market’s established structure. As a result of their strategic choices of which competitors to retaliate against or to collaborate with, producers help police and reinforce the boundaries defining a given role. To test our theory, we use data on market role positioning and competitive dynamics in the US airline industry from 1989 to 2010.