Hedonic price theory is adapted to advertising. A quality-adjusted advertising spending function is embedded in a sales response model and the parameters of both equations are estimated in one step. The procedure provides an alternative to the judgmental aggregation of attributes of advertising quality into a single value. The results permit comparison of the sales effects of variations in advertising spending with the effects of variations in copy quality, and permit computation of an advertising figure that accounts for both copy quality and actual spending. A pilot study illustrates the procedure.
Using a unique feature of air cargo transshipment data in the Northeast Asian region, this paper identifies the critical factors that determine the transshipment route choice. Taking advantage of the variations in the transport characteristics in each origin-destination airports pair, the paper uses a discrete choice model to describe the transshipping route choice decision made by an agent (i.e., freight forwarder, consolidator, and large shipper). The analysis incorporates two major factors, monetary cost (such as line-haul cost and landing fee) and time cost (i.e., aircraft turnaround time, including loading and unloading time, custom clearance time, and expected scheduled delay), along with other controls. The estimation method considers the presence of unobserved attributes, and corrects for resulting endogeneity by use of appropriate instrumental variables. Estimation results find that transshipment volumes are more sensitive to time cost, and that the reduction in aircraft turnaround time by 1 hour would be worth the increase in airport charges by more than $1000. Simulation exercises measures the impacts of alternative policy scenarios for a Korean airport, which has recently declared their intention to be a future regional hub in the Northeast Asian region. The results suggest that reducing aircraft turnaround time at the airport be an effective strategy, rather than subsidizing to reduce airport charges.
This paper tries to explore the potential for anticompetitive behaviour in Canadian airline markets arising from barriers to entry. According to the market contestability hypothesis, it is the absence of entry (and exit) barriers that determines whether or not markets are contestable. Markets with entry barriers are less contestable and thus provide better opportunity for predation and subsequent monopoly behavior. The focus here is on the entry barriers themselves, rather than on the types of predatory behavior they elicit. Because of a number of recent innovations in the industry, this paper will further focus its attention on product differentiation as a barrier to entry. After a brief summary of the traditional and new literature on barriers to entry the paper examines potential entry barriers such as frequent flyer programs, travel agent buying power, computer reservation systems, airport access and shared designator codes. hubbing and the strategic choice of network and service levels are also assessed, and how these are affected by the above issues.(a)
The paper reviews the origins of empirical cost analysis in transportation but concentrates on developments over the last 15 years or so. Aggregate cost functions are studied to infer broad cost characteristics of the industry, notably the presence or absence of economies of scale or density. Recently the calculation of scale economies is being reconsidered. If there are interactions among output categories and/or output attributes associated with firm size, there may be cost advantages to large firms but not because of scale per se. A second purpose of cost functions is to make efficiency comparisons across firms and/or over time. The cost function (or productivity index) is decomposed to identify the influence of scale, mix of outputs, output attributes, and characteristics of the market environment, to reveal residual efficiency differences. Other recent developments reviewed include: (1) the use of flexible functional forms (e.g., the translog); (2) output measurement, output attributes, and hedonic functions; (3) the treatment of fixed inputs in short run cost functions; and (4) the use of frontier estimation techniques.
This paper applies a stochastic cost frontier model to a panel of 54 major airports over 2002-2008 to examine how the two dominant governance forms of publicly owned airports in the United States and Canada, namely, operation and governance by a government (city, county, or state) branch, or by an airport authority, affect airport efficiency performance. Our key findings are (a) airports operated by an airport authority achieve higher cost efficiency (on average, 14% higher technical efficiency) than those operated by a government branch; (b) airports operated by a government branch have lower labor share than those operated by an airport authority; and (c) there is no statistically significant difference in the efficiency performance between airports operated by U.S. airport authorities and Canadian airport authorities.
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