Analyzing market competition between Airbus and Boeing using a duo hierarchical graph model for conflict resolution

Abstract

A duo hierarchical graph model for conflict resolution is developed to investigate market competition between Airbus and Boeing over aircraft sales in the Asia Pacific region. The duo hierarchical graph model, a significant extension of the graph model for conflict resolution methodology, contains two common decision makers, who take part in two related subconflicts, as well as local decision makers, who participate in only one subconflict. New stability definitions are proposed to describe forms of sanction unique to the hierarchical model. The interrelationships between stabilities in the overall graph model and in the two local models are investigated. Then the duo hierarchical graph model is applied to the competition between Airbus and Boeing in both the wide and narrow body markets in the Asia-Pacific region. The two types of Asian airlines have different operating strategies, so that the two markets constitute sub-competitions that can be modelled naturally using the duo hierarchical graph model. The stability results indicate a resolution for all decision makers that implies marketing strategies for the aircraft manufacturers and guidelines for aircraft purchase by the airlines. Thus, this model provides decision makers with a comprehensive understanding of the dynamics of the competition and guidance in identifying beneficial actions.

Keywords

Hierarchical Graph Model / Airbus and Boeing / stability results / strategic resolutions

References

[1] Airbus Global market forecast 2014-2033, 2014

[2] Airbus Singapore airlines to order more A380s and A350 XWBs, 2012

[3] Axlegeeks Compare airplanes: Airbus vs Boeing, 2015

[4] Bashar M. A., Hipel K. W., Kilgour D. M., Obeidi A.. Coalition fuzzy stability analysis in the graph model for conflict resolution. Journal of Intelligent and Fuzzy Systems, 2014, 29(2): 593-607.

[5] BBC News Dreamliner: Boeing 787 planes grounded on safety fears, 2013

[6] Blaug M.. Invisible hand. The New Palgrave Dictionary of Economics, 2008 564-566.

[7] Boeing. Boeing introduces 737 MAX with launch of new aircraft family, 2011

[8] Boeing. Global market outlook/ Asia Pacific 2014-2033, 2014

[9] CBC News Air canada orders 61 Boeing 737max jets, 2013

[10] Doganis R.. Flying off Course: The Economics of International Airlines, 2002

[11] Dozic S., Kalic M.. An AHP approach to aircraft selection process. Transportation Research Procedia, 2014, 3: 165-174.

[12] Esposito E.. Strategic alliances and internationalisation in the aircraft manufacturing industry. Technological Forecasting and Social Change, 2004, 71(5): 443-468.

[13] Fang L., Hipel K. W., Kilgour D. M.. Interactive Decision Making: the Graph Model for Conflict Resolution, 1993

[14] Fang L., Hipel K. W., Kilgour D. M., Peng X.. A decision support system for interactive deci-sion making-Part I: model formulation. IEEE Transactions on Systems, Man, and Cybernetics, Part C: Applications and Reviews, 2003, 33(1): 42-55.

[15] Fang L., Hipel K. W., Kilgour D. M., Peng X. J.. A decision support system for interactive decision making-Part II: analysis and output interpretation. IEEE Transactions on Systems, Man, and Cybernetics, Part C: Applications and Reviews, 2003, 33(1): 56-66.

[16] Fleisher C. S., Bensoussan B. E.. Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition, 2003

[17] Flouris T.. Rationalizing aircraft performance dynamic modeling in airline fleet planning decisions. Enterprise Risk Management, 2010, 2(1): 39-67.

[18] Forbes Boeing looks set to beat Airbus in orders and deliveries in 2014, 2014

[19] Fraser N. M., Hipel K. W.. Conflict Analysis: Models and Resolutions, 1984.

[20] Gillen D., Morrison W. G.. Regulation, competition and network evolution in aviation. Journal of Air Transport Management, 2005, 11(3): 161-174.

[21] Hamouda L., Kilgour D. M., Hipel K. W.. Strength of preference in the graph model for conflict resolution. Group Decision and Negotiation, 2004, 13(5): 449-462.

[22] Hawlena J.. Airbus versus Boeing–which company will win. Logistics and Transport, 2009, 9(2): 9-15.

[23] He S., Hipel K. W., Kilgour D. M.. Water diversion conflicts in China: a hierarchical perspective. Water Resources Management, 2014, 28(7): 1823-1837.

[24] He S., Kilgour D. M., Hipel K. W.. A general hierarchical graph model for conflict resolution with application to greenhouse gas emission disputes between USA and China. European Journal of Operational Research, 2017, 257(3): 919-932.

[25] He S., Kilgour D. M., Hipel K. W., Bashar M. A.. A basic hierarchical graph model for conflict resolution with application to water diversion conflicts in China. INFOR: Information Systems and Operational Research, 2013, 51(3): 103-119.

[26] Hepher T.. Boeing wide-body jet battle triggers warnings of oversupply, 2014

[27] Hepher T.. Boeing and Airbus are neck-and-neck heading into the end of 2014, 2014

[28] Hipel K. W.. Conflict resolution: theme overview paper in conflict resolution. Encyclopedia of Life Support Systems (EOLSS), 2002, 2: 50-52.

[29] Hipel K. W.. Conflict Resolution Vol. I and II, 2009

[30] Hipel K. W., Fang L., Kilgour D. M.. Decision support systems in water resources and environmental management. Journal of Hydrologic Engineering, 2008, 13(9): 761-770.

[31] Hipel K. W., Obeidi A.. Trade versus the environment: strategic settlement from a systems engineering perspective. Systems Engineering, 2005, 8(3): 211-233.

[32] Howard N.. Paradoxes of Rationality: Theory of Metagames and Political Behavior, Volume 1, 1971, New York: MIT press.

[33] Howard N.. Confrontation analysis: how to win operations other than war, 1999

[34] Ibsen A. Z.. The politics of airplane production: the emergence of two technological frames in the competition between Boeing and Airbus. Technology in Society, 2009, 31(4): 342-349.

[35] Inohara T., Hipel K. W.. Coalition analysis in the graph model for conflict resolution. Systems Engineering, 2008, 11(4): 343-359.

[36] Inohara T., Hipel K. W.. Interrelationships among noncooperative and coalition stability concepts. Journal of Systems Science and Systems Engineering, 2008, 17(1): 1-29.

[37] Irwin D. A., Pavcnik N.. Airbus versus Boeing revisited: international competition in the aircraft market. Journal of International Economics, 2004, 64(2): 223-245.

[38] Johnsson J.. Boeing unveils its jumbo killer, 2013

[39] Kilgour D., Hipel K.. The graph model for conflict resolution: past, present, and future. Group Decision and Negotiation, 2005, 14(6): 441-460.

[40] Kilgour D. M.. Luterbacher U., Ward M. D.. Anticipation and stability in two-person non-cooperative games. Dynamic Models of International Conflict, 1985 26-51.

[41] Kilgour D. M., Hipel K. W.. Eden C.. Conflict analysis methods: the graph model for conflict resolution. Handbook of Group Decision and Negotiation, 2010 203-222.

[42] Kilgour D. M., Hipel K. W., Fang L., Peng X. J.. Coalition analysis in group decision support. Group Decision and Negotiation, 2001, 10(2): 159-175.

[43] King J. M.. The Airbus 380 and Boeing 787: a role in the recovery of the airline transport market. Journal of Air Transport Management, 2007, 13(1): 16-22.

[44] Kuang H., Bashar M. A., Hipel K. W., Kilgour D. M.. Grey-based preference in a graph model for conflict resolution with multiple decision makers. IEEE Transactions on Systems, Man & Cybernetics: Systems, 2015, 45(9): 1254-1267.

[45] Leeham 747-8 vs A380 costs: airlines weigh in, 2015

[46] Li K. W., Hipel K. W., Kilgour D. M., Fang L.. Preference uncertainty in the graph model for conflict resolution. IEEE Transactions on Systems, Man and Cybernetics, Part A: Systems and Humans, 2004, 34(4): 507-520.

[47] Nash J. F.. Equilibrium points in n-person games. Proceedings of the National Academy of Sciences of the United States of America, 1950, 36(1): 48-49.

[48] Nash J. F.. Non-cooperative games. Annals of Mathematics, 1951, 54(2): 286-295.

[49] Ozdemir Y., Basligil H., Karaca M.. Aircraft selection using analytic network process: a case for Turkish Airlines. Proceedings of the World Congress on Engineering (WCE), 2011, 8: 9-13.

[50] Planespotters. B777 Production list, 2015

[51] Scott A.. Boeing sees $5.2 trillion jet market win versus Airbus on twin-aisles, 2014

[52] Sepang AirAsia X places firm order for 55 A330neo, 2014

[53] Stigler G. J.. Palgrave’s dictionary of economics. Journal of Economic Literature, 1988 1729-1736.

[54] Trubbach N.. Ryanair and other low-cost carriers eliminate rivals with uniquefleetstrategy, 2013

[55] Von Neumann J., Morgenstern O.. Theory of Games and Economic Behavior, 1944.

[56] Xu H., Hipel K. W., Kilgour D. M.. Matrix representation of solution concepts in multiple-decision-maker graph models. IEEE Transactions on Systems, Man and Cybernetics, Part A: Systems and Humans, 2009, 39(1): 96-108.