ABSTRACT
This chapter analyzes the two middle hybrid market structures: monopolistic competition and oligopolies. It shows how each hybrid market structure impacts a company's productivity and profitability. Oligopoly is the most relevant market structure with regard to aviation. The chapter provides a closer examination of three major forms of oligopolies that make up the greater part of the aviation industry: airlines, aircraft manufacturers, and jet engine manufacturers. There are two widely used methods for evaluating industry consolidation: the four-firm concentration ratio and the Herfindahl index. The chapter examines the models of monopolistic competition and oligopoly, the so-called hybrid markets. Demand for a firm's product in perfectly competitive markets is essentially horizontal, since the firm is a price taker and has virtually no power to set prices. The chapter provides an overview of various theories of oligopoly, including contestability, kinked demand curve, and Cournot models.
