Game-Based Analysis on Motive of Regional Air Route Cooperation

Since the independent regional air route operates at a low level of profitability because of small transport volume and high operation cost, the BERTRAND game model was used to analyze the effect of the cooperation of the regional air route with branch air route on its operating profit from the point of market game. Regional air route was divided into two types, point to point and hub-spoke. Market structure models of cooperation and non-cooperation between regional air route and branch air route were built respectively for the origin-destination regional markets without point to point air route and with both point to point and hub-spoke air route. Total equilibrium profits under different market structures were compared. The results show that total profits of cooperative market structures are higher than those of noncooperation.