The Measurement of Concentration and Conjectural Variations of Aviation Industry in Thailand

Abstract

This study aims to analyze the market structure and concentration of the aviation industry in Thailand, as well as investigate the reactions among airlines during 2014-2023. This study employs a descriptive analysis approach to examine the notion of market structure and quantitative analysis using the concept of industry concentration, which includes the Concentration Ratio (CR), Herfindahl-Hirschman Index (HHI) and Conjectural Variations (CVs). The result on market structure and concentration operated that the airline industry operated under an oligopoly market structure. Competitive behavior encompasses both price and non-price elements. The industry concentration is consistent with both the Concentration Ratio (CR) and the Herfindahl-Hirschman Index (HHI). CR values indicate a combined concentration rate ranging from 40 percent to 60 percent. HHI values exceeding 0.18 indicate significant concentration levels. It has a pattern that closely resembles the market structure of an oligopoly. The result of analysis forecasts other airlines reactions by categorizing airlines into two distinct groups; full-service airlines and low-cost airlines reveals that the Conjectural Variations (CVs) differs between these two groups and is positively correlated. This means that when an airline decides to change its passengers carried, that airlines will have to predict the reaction of competing airlines to changes in their passengers carried in the same direction. In addition, airlines prioritize monitoring changes in the passengers carried by their competitors, especially low-cost airlines rather than full-service airlines.