CIRJE-F-797 "Duopoly in the Japanese Airline Market: Bayesian Estimation for the Entry Game"
Author Name Sugawara, Shinya and Yasuhiro Omori
Date April 2011
Full Paper   PDF file
Remarks   Revised version of CIRJE-F-556 (2008) and CIRJE-F-763 (2010); forthcoming in Japanese Economic Review, 63-3, 310-332 (September 2012).

This paper provides an econometric analysis on a duopoly game in the Japanese domestic airline market. We establish a novel Bayesian estimation approach for the entry game, which allows the incorporation of flexible inference techniques. We find asymmetric strategic interactions between Japanese firms, which implies that competition is still influenced by the former regulation regime. Furthermore, our prediction analysis indicates that the new Shizuoka airport will suffer from a lack of demand in the future.