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A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets

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  • W. Whalen

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    Abstract

    This paper estimates the effects of code-sharing, antitrust immunity, and Open Skies treaties on prices, output, and capacity using an eleven-year panel of U.S.-Europe data. Code-sharing and immunized alliances are found to have significantly lower prices than does traditional interline (multi-carrier) service, but the effects are smaller in magnitude than those found in previous results that rely on cross-sectional data. Statistical tests that prices for immunized alliance service are equal to online (single carrier) service often cannot be rejected, providing additional evidence that immunity grants allow immunized carriers to internalize a double marginalization problem. Estimated output effects, consistent with the price effects, show that alliances are associated with large increases in passenger volumes. Lastly, estimates suggest that capacity expansions associated with “Open Skies” treaties are due entirely to expansion by immunized carriers on routes between their hubs. Copyright Springer Science+Business Media, LLC 2007

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    File URL: http://hdl.handle.net/10.1007/s11151-007-9125-0
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    Bibliographic Info

    Article provided by Springer in its journal Review of Industrial Organization.

    Volume (Year): 30 (2007)
    Issue (Month): 1 (February)
    Pages: 39-61

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    Handle: RePEc:kap:revind:v:30:y:2007:i:1:p:39-61

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    Web page: http://www.springerlink.com/link.asp?id=100336

    Related research

    Keywords: Airline Alliances; Antitrust Immunity; Code-Sharing; Open Skies Treaties;

    References

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    1. Park, Jong-Hun, 1997. "The effects of airline alliances on markets and economic welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(3), pages 181-195, September.
    2. Gustavo E. Bamberger & Dennis W. Carlton & Lynette R. Neumann, 2001. "An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances," NBER Working Papers 8197, National Bureau of Economic Research, Inc.
    3. Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
    4. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-45, October.
    5. Volodymyr Bilotkach, 2005. "Price Competition between International Airline Alliances," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 39(2), pages 167-190, May.
    6. Jong-Hun Park & Anming Zhang, 2000. "An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets," Review of Industrial Organization, Springer, vol. 16(4), pages 367-384, June.
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    Cited by:
    1. Brueckner, Jan K. & Proost, Stef, 2010. "Carve-outs under airline antitrust immunity," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 657-668, November.
    2. Brueckner, Jan K. & Lee, Darin & Singer, Ethan S., 2013. "Airline competition and domestic US airfares: A comprehensivereappraisal," Economics of Transportation, Elsevier, vol. 2(1), pages 1-17.
    3. Ricardo Flores-Fillol & Rafael Moner-Colonques, 2011. "Endogenous Mergers of Complements with Mixed Bundling," Review of Industrial Organization, Springer, vol. 39(3), pages 231-251, November.
    4. repec:hal:cesptp:hal-00622831 is not listed on IDEAS
    5. Philippe Gagnepain & Pedro Marín, 2010. "The effects of airline alliances: what do the aggregate data say?," SERIEs, Spanish Economic Association, vol. 1(3), pages 251-276, July.
    6. Bilotkach, Volodymyr & Hüschelrath, Kai, 2012. "Airline alliances and antitrust policy: The role of efficiencies," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 76-84.
    7. Cristea, Anca D., 2011. "Buyer-Seller Relationships in International Trade: Evidence from U.S. States' Exports and Business-Class Travel," MPRA Paper 30347, University Library of Munich, Germany.
    8. Stephen Martin, 2012. "Market Structure and Market Performance," Review of Industrial Organization, Springer, vol. 40(2), pages 87-108, March.

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