Airline Competition in Duopoly Market and its Impact on Environmental Emissions: A Game Theory Approach

Abstract

The Fleet-Level Environmental Evaluation Tool (FLEET) is a simulation tool that evaluates the impact of commercial aviation operations on environmental emissions. FLEET adopts a system dynamics-type approach in modeling airline operations as a resource allocation problem, where several variations of economic conditions, aircraft technology availability, and policy implementation initiatives can be studied. Previous work with FLEET included a 'duopoly' model that presented the economic competition between legacy and low cost airlines. This model solved the resource allocation problem for the two competing airlines independent of each other. The motivation for the current paper is to portray a more realistic airline market competition. We use the notion of Nash equilibrium from game theory to find local equilibrium strategies for both airline carrier types, where each airline's operation is dependent on the other's resource allocation solution. This work describes the resulting game theory-based duopoly model and compares the simulation results with the previously developed system dynamics-type duopoly model. The evolution of Market Share Ratio from each model is similar, but both differ substantially from historical data. Nomenclature#,% = Block hours of aircraft type k on route j # = Capacity of aircraft type k #,% , = Direct Operating Cost (DOC) of aircraft type k on route j for airline i % = Total market demand on route j % 2 = Average fare on route j of airline i # , = Number of aircraft type k in the fleet of airline i MH 7,8 = Maintenance hours of aircraft type k on route j % , = Market share of airline i on route j #,% , = Number of passengers that fly on aircraft type k on route j for airline i #,% , = Ticket price on aircraft type k on route j for airline i % = Market share ratio on route j #,% , = Number of trips of aircraft type k on route j for airline i , = Turnaround time of airline i , = Payoff function of player i

Estimating the Reduction in Future Fleet-Level CO2 Emissions From Sustainable Aviation Fuel

“…The predicted usage of these new aircraft drives the fleet-level environmental impacts. Many studies exist that discuss the various studies conducted with FLEET considering only subsonic aircraft operations (Moolchandani et al, 2011;Moolchandani et al, 2012;Moolchandani et al, 2013;Chao, 2016;Chao et al, 2016;Moolchandani et al, 2017;Ogunsina et al, 2017;Ogunsina et al, 2018;Jain et al, 2021a). Recent FLEET studies considering a mixture of supersonic and subsonic commercial aircraft in airline fleet also exist Jain et al, 2021b;Mane et al, 2021).…”