Oligopoly or contestable markets in the UK package tour industry?

This article examines the Ricardian model of the industry developed by Baum and Mudambi [1994]. It suggests that several of the explicit and implicit assumptions may not be reasonable. All of their examples of a duopoly in which equilibrium fails to exist depend crucially on each firm having the naive belief that the other prm will not react to its strategic moves. When the reactions of the other firm are considered by each firm, the main model has an equilibrium sustained by firms withholding units. The analysis is extended regarding equilibrium and concentration of unit ownership to show that only large firms find it in their interest to withhold units at the margin, whilst large firms selling units with qualities well above marginal qualities may not find it in their interest to withhold units. Strategic withholding and industry structure ave thus interdependent.