Exit and Social Efficiency: Japanese Domestic Airline Market

摘要

This study, based on a structural model and counterfactual experiments, examines the social efficiency impact of airline exit from the Japanese domestic airline market. Results show that a rival airline's exit softens the economic environment. Passengers who earlier used the exited airline reselect airlines. Calculations of the social surplus of each counterfactual scenario show that it decreases because of a company's exit. Depending on the company size, however, cases arise in which the social surplus of monopoly is greater than that of oligopoly, which is inconsistent with the implications of traditional economic theory.