Airline Code-share Alliances and Costs: Imposing Concavity on Translog Cost Function Estimation
AbstractThis paper provides an assessment of how airline code-share alliances affect the costs of the airline industry. It makes two contributions to the literature. First, it measures the effects of airline alliances by estimating a translog cost function using a panel dataset of 10 major U.S.-based airlines over 29 quarters. Secondly, it ensures concavity of the estimated cost function by using the procedure suggested by Ryan and Wales (2000, Economics Letters 67, 253–260). A conventional translog cost function is first estimated and scale estimates are computed. Unfortunately, the estimated function fails the curvature requirement, which makes interpreting the estimated effects of alliances somewhat dubious. Hence, we re-estimate the cost function by imposing local concavity restrictions. We find that large alliance partners have a small negative effect on airlines’ costs, but small alliance partners’ effect on costs appear to be positive, although the magnitude is negligible. We also find material differences in the estimates of scale economies after imposing local concavity. Copyright Springer 2005
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 26 (2005)
Issue (Month): 4 (06)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100336
Airline alliances; concavity; costs; translog;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goh, Mark & Yong, Jongsay, 2006. "Impacts of code-share alliances on airline cost structure: A truncated third-order translog estimation," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 835-866, July.
- Zou, Bo & Hansen, Mark, 2012. "Impact of operational performance on air carrier cost structure: Evidence from US airlines," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 1032-1048.
- Kazuo Ogawa, 2008.
"Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period,"
ISER Discussion Paper
0719, Institute of Social and Economic Research, Osaka University.
- Kazuo Ogawa, 2011. "Why Are Concavity Conditions Not Satisfied in the Cost Function? The Case of Japanese Manufacturing Firms during the Bubble Period," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(4), pages 556-580, 08.
- Linz, Teresa & Tsegai, Daniel W., 2009. "Industrial Water Demand analysis in the Middle Olifants sub-basin of South Africa: The case of Mining," Discussion Papers 49927, University of Bonn, Center for Development Research (ZEF).
- Ryerson, Megan S., 2010. "Optimal Intercity Transportation Services with Heterogeneous Demand and Variable Fuel Price," University of California Transportation Center, Working Papers qt8696z26t, University of California Transportation Center.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.