The paper examines if and how incumbent firms respond to entry and entry threats using non-price modes of competition. The analysis focuses on airline service quality. According to the findings incumbent on-time performance actually worsens in response to entry, and even entry threats, by Southwest Airlines. For example, within the first year after Southwest’s entry, the proportion of incumbent airlines’ flights arriving at least 15 minutes late rose an average of 3.2 percentage points. The performance decline may be a result of airlines’ cost-cutting in response to the new threat, the researchers say. Download the full paper at the Social Sience Research Network