Economics Dictionary of ArgumentsHome
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| Aviation: In economics, aviation refers to the air transport industry, encompassing the production, operation, and regulation of aircraft for passenger and cargo services. It plays a vital role in global trade, tourism, and economic connectivity. Economic analysis of aviation includes market competition, pricing, environmental impact, infrastructure investment, and regulation. See also Transport policy, Industrial policy, Trade policy, International trade, Subsidies. _____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Gernot Klepper on Aviation - Dictionary of Arguments
Krugman III 104 Aviation/Klepper: Aircraft producers compete in essentially two ways. There is first the long-run decision about product choice and capacity. The demand in each segment even over a long time horizon is small in terms of the number of aircraft: 3,000 to 4,000 units each in the short- and medium-range markets and around 2,000 units in the long-range market are the expected market sizes over the next 20 years. Since learning effects are embodied in the work force, capacity choice becomes the crucial long-run decision variable. In each of the market segments-short-range narrow-bodied, short- and medium-range wide-bodied, and long-range aircraft-Airbus and Boeing offer competing generic aircraft, with possible derivatives. Long run/short run: Once capacity is determined, aircraft producers have limited choice over short-run output levels. They essentially produce at full capacity; that is, their time profile of deliveries is determined. A decision to increase capacity is then comparable to a new start on the learning curve.' The producers then bargain with airlines in their day-to-day marketing activities over the price of aircraft. >Long run/short run. Bargaining/negotiations: Airlines seem to make extensive use of repeated negotiations with the suppliers of an aircraft for a specific market segment. Competition takes the form of a price game at given capacity levels, where the outcome of the long-run quantity game then becomes a restriction in the short-run price game. Demand/price: If demand turns out to be larger than expected, firms will produce at their capacity limit and choose prices which maximize profits. For unexpectedly low demand, the price game may drive prices down to marginal cost levels. Krugman III 121 Subsidies/competition: The same logic according to which it is advantageous to subsidize Airbus applies, of course, to subsidizing Boeing, even more so since Boeing has lower unit cost because of learning effects from prior production. Both governments therefore have an incentive to subsidize their respective industries. Whether any government has a dominant strategy depends on the outcome of subsidization with retaliation. In Brander and Spencer (1985)(1) a Nash equilibrium in export subsidies exists. It is a prisoner’s dilemma, since both countries could be better off by jointly reducing subsidy levels but would be worse off by unilaterally reducing subsidies. >Nash equilibrium, >Prisoner’s dilemma, >Subsidies, >Interventions, >Interventionism, >Government policy, >Market entry/Klepper, >Industrial policy. 1. Brander, James A, and Barbara J. Spence. 1985. Export subsidies and international market share rivalry. Journal of International Economics 18:83-100. Gernot Klepper. „Industrial Policy in the Transport Aircraft Industry.“ In: Paul Krugman and Alasdair Smith (Eds.) 1994. Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Klepper, Gernot EconKrug I Paul Krugman Volkswirtschaftslehre Stuttgart 2017 EconKrug II Paul Krugman Robin Wells Microeconomics New York 2014 Krugman III Paul Krugman Alasdair Smith Empirical Studies of Strategic Trade Policy Chicago: The University of Chicago Press 1994 |
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