This is the pdf file for the journal of airline industry.
The URL is S Berry - Econometrica, 1992 - econ.jhu.edu
So i just take some part from the journal.
This paper investigates the importance of airport presence in determining the
profits of operating in a given city pair. The empirical methodology relies on a
model of equilibrium outcomes which allows for an economic interpretation of
estimated coefficients and for a preliminary study of how city pair market
structure would change if city pair entry were made less costly, either by direct
subsidy or by changes in airport regulation.
The paper emphasizes several methodological issues that are of particular
importance in studying airline city pairs. One issue is the simultaneity of profits
and market structure in oligopolistic markets. In this respect the paper bears a
resemblance to the independent work, discussed below, of Bresnahan and Reiss
(1987, 1990, 1991) and Reiss and Spiller (1989) on entry in oligopolistic markets.
A second problem arises from the presence of a large number of heterogeneous
potential entrants, where the "heterogeneity" stems from observed or unobserved
variations in firm costs and demand.
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