A Study on Duopoly Competition in the Low-Altitude Economy Based on the Hotelling Model: Analysis of Air Taxi Advertising Strategies and Intercity Service Decisions

Driven by government subsidies and advertising revenue, air taxis present an innovative solution to alleviate traffic congestion and are poised for growth. However, at their current stage of development, air taxi companies primarily operate short-distance routes within cities and rarely offer intercity services. Moreover, as a new mode of transportation, air taxis experience low levels of consumer trust at present. This study, grounded in the Hotelling model, examines differentiated decision-making scenarios between two competing air taxi service providers. It systematically analyzes how service expansion (specifically, the introduction of intercity services) and advertising strategies affect pricing, market share, and profits. Furthermore, it explores optimal decision-making patterns under external disturbances, providing theoretical support for service providers formulating operational strategies. We constructed a differentiated decision-making game model to simulate competition between Service Provider 1 (which does not offer intercity services but may advertise) and Service Provider 2 (which advertises but may choose whether to offer intercity services). By comparing game equilibrium outcomes under different decision combinations, we identify threshold conditions for key variables (e.g., additional price for intercity services and the advertising discount coefficient). The model is further expanded to incorporate external disturbance factors, allowing for analysis of how such environments influence the profitability of each decision pattern. Research has revealed that 1. offering intercity services can increase a provider’s optimal price and market share, but only if the “additional price for intercity services exceeds the threshold”; 2. both providers choosing advertising services is the optimal strategy, but if the advertising discount coefficient exceeds a reasonable range, it will intensify vicious competition. Therefore, it must be controlled within the optimal threshold to avoid adverse effects; 3. under external disturbance conditions, service providers prefer models that do not involve intercity services, and the “both parties advertise (NTX)” combination is more optimal. If intercity services are necessary, disturbance risks must be carefully assessed, or flexible cost and operational strategies should be implemented to hedge against negative impacts.