Government Pricing in a Competitive Air Transportation Market

This paper proposes a game-theoretic model for the government pricing in the air transportation industry of China. The interaction between the government and airlines and the competition among airlines have been considered. A two-stage non-cooperative Nash game is developed to model the government´s and airlines´ decisions. Equilibria of the game are computed by an iterative algorithm, and a numerical example from the China´s airline market demonstrates the feasibility of applying the proposed model.