Financial Distress and US Airline Fares
AbstractThis paper examines the impact of firm financial distress and bankruptcy on an airline's pricing behaviour. Three theoretical rationales are set forth: the supply-side rationale suggests that the bankrupt firm's lower operating costs may result in lower prices; from a demand perspective, distressed firms' prices may be lowered in response to reduced consumer demand; and the strategic rationale then suggests that distressed firms may reduce prices and sell off inventory to generate cash for long-term survival. The hypotheses are tested by estimating price and output equations with data from the US airline industry. The results provide support for the supply-side and demand-side rationales and confirm the general contention that distressed carriers' fares are lower, all other things being equal. © 2005 LSE and the University of Bath
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 London School of Economics and University of Bath in its journal Journal of Transport Economics and Policy.
Volume (Year): 39 (2005)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.bath.ac.uk/e-journals/jtep
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.