2020 (17), №4

Modelling of the Impact of National Standardization on Duopolistic Competition in the Civil Aircraft Market

For citation: 

Varyukhina, E. V., & Klochkov, V. V. (2020). Modelling of the Impact of National Standardization on Duopolistic Competition in the Civil Aircraft Market. Zhurnal Economicheskoj Teorii [Russian Journal of Economic Theory], 17 (4), 859-873.

Abstract:

The purpose of this study is to analyze standards as one of the main tools of protectionism in global markets of industrial goods. We use standards for modeling of market competition and adapt this approach for civil aviation markets. The role of local noise standards in civil aircraft markets is discussed. Imposition of more stringent aviation noise standards is modelled in the form of a two-person non-zero-sum game. Players are aircraft corporations that conduct research and development to reduce noise and lobby for stricter regulations in their controlled markets. The model can be used to predict that tighter aviation noise standards will be imposed and to justify the strategy of Russian aviation industry and science. The proposed approach can be adapted for other industries with strict regulations (in terms of safety, ecology). Such estimation allows us to assess whether it is in the country’s interests to participate in the standards race or not. It is shown that the equilibrium degree of standards tightening is higher if the players’ market shares are close to equal or individual players have advantages in the cost of production and/or product improvement is highly likely due to the company’s R&D progress.

PDF full
Downloaded: 41

Ekaterina Vital’evna Varyukhina — PhD in Technical Sciences, Senior Researcher, The National Research Center “Zhukovsky Institute” (Zhukovsky, Russian Federation; e-mail: e.varyukhina@yandex.ru).

Vladislav Valer’evich Klochkov — Doctor of Economics, Deputy Director General, The National Research Center “Zhukovsky Institute” (Zhukovsky, Russian Federation; e-mail: vlad_klochkov@mail.ru).

Bond, D. (2001). V knigu o shume vpisivaetsia chetvertaya glava [The book on noise reaches chapter 4].  Aviatransportnoe obozrenie [Air transport observer], 1 (32).  (In Russ.)

Varyukhina, E. V., & Klochkov, V. V. (2016). Standarty i normy kak instrumenty protekcionizma: problema opredeleniya granic rynkov (na primere grazhdanskogo aviastroeniya) [Standards and norms as tools of protectionism: the problem of defining the boundaries of market (on example of civil aircraft industry)].  Zhurnal ekonomicheskoj teorii [Russian Journal of Economic theory], 2,  57–71. (In Russ.)

Volkov, S. (2002). K svobodnomu poletu nad Evropoy [On the track to free flight over Europe].  Dvigatel [Engine], 2.  (In Russ.)

Dmitriev, V. G., & Munin, A. G. (2003). Ekologicheskie problemy grazhdanskoy aviatsii [Environmental Problems of Civil Aviation].  Aerokosmicheskiy kur’er [Aerospace Courier], 2,  15–17. (In Russ.)

Klochkov, V. V. (2009).  Upravlenie innovatsionnym razvitiem grazhdanskogo aviastroeniya [Management of innovative development of civil aviation].  Мoscow, Russia: GOU VPO, 280. (In Russ.)

Klochkov, V. V., & Ratner, S. V. (2013).  Upravlenie razvitiem “zelenykh tekhnologiy”: ekonomicheskie aspekty [Managing the development of green technologies: Economic aspects].  Moscow, Russia: IPU RAN, 292. (In Russ.)

Makhit’ko, V. P. (2008).  Gosudarstvennoe regulirovanie i rynok v aviastroenii: uchebnoe posobie [Government regulation and the market in aircraft industry].  Ulyanovsk, Russia: UlGTU, 243. (In Russ.)

Palkin, V. A., & Bakaleev, V. P. (2002).  Strategiya vedushchikh zarubezhnykh aviadvigatelestroitel’nykh kompaniy v XXI veke [Strategy of leading foreign aviation engine companies in the XXI century].  Moscow, Russia: CIAM, 45. (In Russ.)

Sergeev, A. (2007). Dokhodnoe mesto: v zone prileta [Profitable place: in the arrivals area].  Vedomosti. Prilozhenie «Nedvizhimost’: steny biznesa» [Vedomosti. Application “Real estate: walls of business”].  (In Russ.)

Alchian, A. (1963). Reliability of Progress Curves in Airframe Production.  Econometrica, 31(4),  679–694.

Baldwin, R., & Krugman, P. (1988). Industrial Policy and International Competition in Wide-bodied Jet Aircraft.  Trade Policy and Empirical Analysis.  Univ. of Chicago Press for the NBER, 45–71.

Ben-Yosef, Eldad. (2005).  The Evolution of the US Airline Industry: Theory, Strategy and Policy.  Springer, US, 298.

Benkard, C. L. (2004). A Dynamic Analysis of the Market for Wide-bodied Commercial Aircraft.  Review of Economic Studies, 71(3),  581–611.

Ebner, A. (2011). Transnational Markets and the Polanyi Problem.  Karl Polanyi, Globalisation and the Potential of Law in Transnational Markets.  In C. Joerges J. Falke (Eds.). Oxford, UK: Hart, 19–41.

Fichert, F. (2006).  Economic Instruments for Reducing Aircraft Noise: Theoretical Framework and Recent Experience. Perspectives on Competition in Transportation.  In M. Pickhardt, J. S. Pons (Eds.). Münster, Germany, 59–75.

Gholz, E. (1997). Getting Subsidies Right: U.S. Government Support to the Commercial Aircraft Industry.  MIT Centre for International Studies.  Cambridge, MA, 47.

Irwin, D. A., & Pavcnik, N. (2004). Airbus versus Boeing Revisited: International Competition in the Aircraft Market.  Journal of International Economics, 64(2),  223–245.

 Handbook on the Antitrust Aspects of Standards Setting  (2004). American Bar Association Section of Antitrust law, 188.

Cabral, Luis M. B., & Kretschmer, T. (2007). Standards battles and public policy.  Standards and Public Policy.  Cambridge University Press, 329–344.

Wright, T. P. (1936). Factors Affecting the Cost of Airplanes.  Journal of Aeronautical Sciences, 3,  122–128.