Do Incumbents Improve Service Quality in Response to Entry? Evidence from Airlines' On-Time Performance

• 成果类型: Article
• 署名作者: Prince, Jeffrey T.; Simon, Daniel H.
• 署名单位: Indiana University System; IU Kelley School of Business; Indiana University Bloomington; Indiana University System; Indiana University Bloomington
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2014.1918
• 发表日期: 2015
• 页码: 372-390
• 关键词: on-time performance; airlines; Quality competition; entry; entry threat

摘要

We examine if and how incumbent firms respond to entry and entry threats using nonprice modes of competition. Our analysis focuses on airline service quality. We find that incumbent on-time performance (OTP) actually worsens in response to entry, and even entry threats, by Southwest Airlines. Since Southwest is both a top-performing airline in OTP and a low-cost carrier (LCC), we conjecture that this response by incumbents may be due to a cost-cutting strategy that allows for intense postentry price competition along with preentry deterrence, or it may be due to a postentry differentiation strategy along with preentry accommodation. Further analysis of entry and entry threats by other airlines is inconclusive, providing evidence that is partially consistent with both hypotheses. Nonetheless, the phenomenon of worsening OTP can only be observed when the (potential) entrant is a LCC (Southwest, Jet Blue, and AirTran).