Network Competition in Air Transportation Markets: Bi-Level Approach

This chapter develops a model to simulate contemporary competition between network and point-to-point (PP) carriers in air transportation markets. In particular, we focus on the transition from the strategies of network carriers to the behavior of PP carriers. The concept of multilevel competition is introduced: the first level is the competition layer of network and PP carriers and the second level is the passengers' optimization layer under network service quality given as optimal solutions at the first level. Second, the properties of the developed model are examined with illustrative examples.