We develop a dynamic model of collusion in airport-pair routes for selected US airlines and specify the first order conditions using a state-space representation that is estimated by Kalman-filtering techniques using the Databank 1A (DB1A) Department of Transportation (DOT) data during the period 1979I-1988IV. We consider two airlines, American (AA) and United (UA) and four city-pairs. Our measure of market power is based on the shadow value of long-run profits in a two-person strategic dynamic game and we find evidence of relative market power of AA in three of the four city pairs we analyze.
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Volume (Year): 6 (2007) Issue (Month): 3 (September) Pages: 355-371 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: C5 - Mathematical and Quantitative Methods - - Econometric Modeling L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
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