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Market evolution and competitive dynamics are important research areas in marketing. This paper develops and empirically tests a comprehensive framework to test core assumptions and to provide a realistic perspective on market evolution through the entry and growth of innovative low-cost methods or discounters and the responses by the incumbents to maintain the status quo. The authors build on the extant literature to model entry, and competitive dynamics that ensues on entry and may significantly influence discounters’ performance based on analysis of 25 years of extensive data from the Airline Industry. They identify that mergers, market structure and multi-market contact may influence entry and growth of discounters in a marketplace. Several implications for managers and for policy makers are discussed

Marketing