APPENDIX 5

APPENDIX 5

In 10 of the 12 cases, the new entrant's fare was at least 50 percent lower than the average fare of the incumbent(s) during the quarter preceding entry. In three-fourths of the cases, within two quarters of new entry, the average fare of the incumbent fell by 1/3 or more. The new entrant exited, in half the cases, within eight quarters after entry. In three of the six cases where the entrant exited, average fares then rose to above pre-entry levels; while in the other three markets, average fares increases above the level of the entry period.

With regard to revenue, in five of the six cases in which the new entrant exited from the market, total incumbent revenues were higher eight quarters later, and had increased sufficiently to offset any revenue losses that came from additional low-fare traffic during the period in which the new entrant was in the market. (Source: Cooper, 2001)