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.
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