INTERFIRM RIVALRY AND FIRM-SPECIFIC PRICE ELASTICITIES IN DEREGULATEDAIRLINE MARKETS

This paper examines the pattern of a firm's pricing rivalry and its as sociated price elasticities, as perceived by each firm in a set of duo poly (American and United) airline routes. The authors estimate jointl y an aggregate route demand function and the firm-specific price funct ions derived from the firms' first-order conditions for profit maximis ation. The parameters of the marginal cost function are also estimated . This model allows for free variation of estimated ''conduct paramete rs'' and price elasticities across airline routes.