Business Intelligence

Duopoly In The Japanese Airline Market: Bayesian Estimation For The Entry Game

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Executive Summary

This paper provides an econometric analysis on a duopoly game in the Japanese domestic airline market. The authors establish a novel Bayesian estimation approach for the entry game, which is free from the conventional identification problem and thus allows the incorporation of flexible inference techniques. They find asymmetric strategic interactions between Japanese firms, which imply that competition will still be influenced by the former regulation regime. Furthermore, their prediction analysis indicates that the new Shizuoka airport will suffer from a lack of demand.

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