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Effect of Merger on Market Price and Product Quality: American and US Airways

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  • Somnath Das

    (Purdue University)

Abstract

In this paper, I analyze the effect of the merger between American Airlines (AA) and US Airways (US) on market price and product quality. I use difference-in-differences analysis (DID) as the identification strategy. The DID analysis shows that the price has decreased and that the decrease in price is larger in bigger city-pair markets. Smaller city-pair markets have not benefited from reduction in price. Price has increased in the smaller markets due to the merger. Slot divestiture also has been helpful in reducing the price. The DID analysis also shows that the merger has no significant effect on the frequency of flights or on the number of seats. Delay in arrival and delay in departure have increased, while the merger has a significant effect in reducing the number of canceled flights.

Suggested Citation

  • Somnath Das, 2019. "Effect of Merger on Market Price and Product Quality: American and US Airways," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(3), pages 339-374, November.
    • Handle: RePEc:kap:revind:v:55:y:2019:i:3:d:10.1007_s11151-019-09717-2
    DOI: 10.1007/s11151-019-09717-2
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    References listed on IDEAS

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    Cited by:

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    3. Thierry Blayac & Patrice Bougette, 2023. "What can be Expected from Mergers After Deregulation? The Case of the Long-Distance Bus Industry in France," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(1), pages 63-97, February.
    4. Le, Huubinh B. & Yimga, Jules O., 2023. "Codeshare restrictions as antitrust remedy," Transport Policy, Elsevier, vol. 138(C), pages 17-24.
    5. , 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry," Working Papers 950, Queen Mary University of London, School of Economics and Finance.
    6. Roucolle, Chantal & Seregina, Tatiana & Urdanoz, Miguel, 2020. "Network development and excess travel time," Transport Policy, Elsevier, vol. 94(C), pages 139-152.

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    More about this item

    Keywords

    Merger; Efficiency; Market power; Product quality;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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