Oligopoly of airplanesA Microeconomic Analysis of Competition

Alex ChristianChristian Dugan

Competitors in the industry

Firm Revenues

2014 TOTAL REVENUE (in millions)

Boeing $90,762.00

Airbus $64,377.03

Dassault $2,572.10

Embraer $6,288.80

Bombardier $10,500.00

Gulfstream $8,600.00

Textron $13,878.00

We see here Boeing is leading the industry dominating over 50 % of the market by selling the most commercial planes .

Airbus is second leading selling more military and luxury jets and the second most commercial planes

Other airplane manufacturers focus on individual sales and focus on private and military airplanes

Boeing 777

Boeing 747

Airbus A380

Boeing 737

Boeing 787

Top 5 Commercial Airplanes

Boeing’s Oligopoly (in the long run) Boeing Total Revenue went up 6%

since 2013, growth going forward being attributed to globalization of airplane market.

Boeing, in the next 20 years, is looking towards the emerging markets to further their market power in the industry.

Barriers of Entry and Product Differentiation

Economies of scale exploited by major firms, Boeing and Airbus, deterring incumbent firms

Superior knowledge of airplane production make a barrier that is continually developing.

Industry structure drives competition and profitability

Cournot Oligopoly

5 75

• In this Oligopoly, firms still cut the revenue from the price maker

• Boeing and Airbus dominate the market as a near duopoly

• Textron, Bombardier, and Gulfstream cut the MR from the top Oligopoly firms.

Factors of Airplane Consumption Consumers who purchase commercial

airplanes usually look to Boeing and Airbus for large scale orders, significant barrier to entry

Smaller industries are not even in the commercial airplane manufacturing industry, military and luxury more preferred and profitable.

Quality of Boeing and Airbus commercial planes act as base of quality for other firms.

Would you enter the market?

• With a growing air cargo traffic around the world, there is a higher demand for commercial airplane

• Variable costs and the impossible barriers of entry make the airplane demand not significant when deciding to enter the market