ABSTRACT
This chapter analyzes both hybrid market structures, and shows how the market structure impacts on companies operating in this environment. Monopolistically competitive markets contain many sellers, but not quite to the degree of a perfectly competitive market. As product differentiation increases, the elasticity of demand decreases, which shifts the firm away from a perfectly competitive market and toward a more monopolistically competitive or oligopolistic market. Oligopolistic markets are of particular interest since most major aviation-related industries are oligopolies. Oligopolistic market characteristics also apply to the aircraft manufacturer's suppliers. The airline industry is clearly an oligopoly market as it only has a few firms participating in the typical city-pair market. Using an airport-by-airport analysis of the domestic aviation market, it is clear that the industry resembles a strong oligopoly rather than the monopolistically competitive market suggested by the industry-wide four-firm concentration ratio.
