TY  - JOUR
AU  - Goolsbee,Austan
AU  - Syverson,Chad
TI  - How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11072
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11072
L1  - http://www.nber.org/papers/w11072.pdf
N1  - Author contact info:
Austan Goolsbee
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-5869
Fax: 773/702-0458
E-Mail: goolsbee@chicagobooth.edu

Chad Syverson
University of Chicago
Booth School of Business
5807 S. Woodlawn Ave.
Chicago, IL  60637
Tel: 773/702-7815
Fax: 773/702-8490
E-Mail: chad.syverson@chicagobooth.edu
AB  - We examine how incumbents respond to the threat of entry by competitors (as distinct from how they respond to actual entry).  We look specifically at passenger airlines, using the evolution of Southwest Airlines’ route network to identify particular routes where the probability of future entry rises abruptly.  We find incumbents cut fares significantly when threatened by Southwest’s entry.  Over half of Southwest’s total impact on incumbent fares occurs before Southwest starts flying.  These cuts are only on threatened routes, not those out of non-Southwest competing airports.  The evidence on whether incumbents are seeking to deter or accommodate entry is mixed.
ER  -