Enhancing airline multimarket competition analysis with a pairwise competitive intensity index based on weighted Jaccard index

Abstract

We advance the measurement of multimarket contact (MMC) in the airline competition literature by introducing a flight frequency weighted Jaccard index. Unlike conventional MMC measures that rely on binary market presence, our proposed index captures both market overlap and supply strategic similarity through flight frequency. Current airline competition research can be divided into market-based metrics (e.g., HHI, CR), which overlook relationships among firms, and airline-based metrics, of which MMC is the most prominent but only considers market overlap. Our index bridges this gap and describes the pairwise competitive intensity among airlines within a specific geographic region. We interpret the use of the index through three applications: unsupervised clustering of airline business models, detection of market shocks, and tracking changes in competitive relationships during disruptions. Our work will allow researchers to refine previous MMC related studies. This work provides policymakers with tools to monitor real-time market competition and may better inform competition regulation design. For airlines, they can leverage the index to identify rivals with the same or different business models, measure their competitive intensity, and choose their competition strategy accordingly.