Service operations to analyse cooperative and non-cooperative competition

Abstract

This study addresses two kinds of competitive behaviour simultaneously: one from action – mobility barriers vs. the other, from reaction – mutual forbearance. We study service frequency and pricing strategy that the US domestic airlines have used against rivals. We attempt to show whether deliberately aggressive strategic action necessarily serves its purpose to deter rivals, or inadvertently stimulates retaliatory reaction. The Pearson correlation statistical method was employed to analyse the relationship between service frequency and price dispersion based on 79,080 observations of real time panel population data over the period of 1–30 September 2016, where the results were compared to the effects of mutual forbearance. The findings reveal that value contributed to coalitions by rivals from stronger leagues cannot overpower the effects of industry structure. On the other hand, collective security is a rational defence for weaker leagues to sustain their performance.