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 is free from the conventional identification problem and
thus allows the incorporation of flexible inference techniques. We find asymmetric
strategic interactions between Japanese firms, which implies that competition
will still be influenced by the former regulation regime. Furthermore, our prediction
analysis indicates that the new Shizuoka airport will suffer from a lack of
demand.
|