MEASURING CHANGES IN MULTIPRODUCT MARKET-STRUCTURE - AN APPLICATION TO US AIRLINES

The Entropy Index decomposition property is utilized to construct an a ggregate index of route concentration that accounts for the multiple p roducts, customer preferences and industry concentration. The Directed Divergence Statistic, an aggregate index which measures changes in ma rket structure at the airline specific level, is similarly decomposed. We find that route concentration more closely resembles a duopoly tha n an industry with 16 major carriers. Further, the Directed Divergence Statistic decomposition reveals that while the industry seems to have absorbed the loss of national three carriers, those remaining enginee red substantial changes in their product offerings to accommodate pass engers.