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The Price Effects of International Airline Alliances

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Author Info
Brueckner, Jan K
Whalen, W Tom

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Abstract

This paper provides evidence on the effect of international airline alliances on fares. The main finding is that alliance partners charge interline fares that are approximately 25 percent below those charged by nonallied carriers. According to our theoretical model, the main source of this fare reduction is the internalization of a negative externality that arises from the uncoordinated choice of interline "subfares" in the absence of an alliance. The paper also looks for evidence of an anti-competitive alliance effect in the gateway-to-gateway markets. While the point estimates show that an alliance between two previously competitive carriers would raise fares by about 5 percent, this effect is not statistically significant. Copyright 2000 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 43 (2000)
Issue (Month): 2 (October)
Pages: 503-45
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Handle: RePEc:ucp:jlawec:v:43:y:2000:i:2:p:503-45

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  1. Achim I. Czerny, 2006. "Code-sharing and its effect on airline fares and welfare," Working Papers 2006-15, Center for Network Industries and Infrastructure (CNI). [Downloadable!]
  2. A. Mantovani & O. Tarola, 2006. "Did the entry of low cost companies foster the growth of strategic alliances in the airline industry?," Working Papers 574, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
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  3. Lazzarini, Sergio G., 2002. "The Performance Implications of Membership in Competing Firm Constellations: Evidence from the Global Airline Industry," Ibmec Working Papers wpe_23, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  4. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May. [Downloadable!] (restricted)
  5. Ming Hsin Lin, 2005. "Alliances and entry in a simple airline network," Economics Bulletin, Economics Bulletin, vol. 12(4), pages 1-11. [Downloadable!]
  6. Darin Lee, 2003. "An Assessment of Some Recent Criticisms of the U.S. Airline Industry," Review of Network Economics, Concept Economics, vol. 2(1), pages 1-9, March. [Downloadable!]
  7. Philip G. Gayle, 2004. "Does Price Matter? Price and Non-price Competition in the Airline Industry," Econometric Society 2004 North American Summer Meetings 163, Econometric Society. [Downloadable!]
  8. Aisling J. Reynolds-Feighan, 2007. "Carrier Network Structures and the Spatial Distribution of Air Traffic in the European Air Transport Market, 1996-2006," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 243-, January-F. [Downloadable!]
  9. Rafael Moner Colonques & Ricardo Flores Fillol, 2005. "Strategic Effects Of International Airline Alliances," Working Papers. Serie AD 2005-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Jan K. Brueckner & Ricardo Flores-Fillol, 2006. "Airline Schedule Competition: Product-Quality Choice in a Duopoly Model," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  11. Eric Emch & Ken Heyer & Robert Majure, 2005. "The Year in Review: Economics at the Antitrust Division, 2004–2005," Review of Industrial Organization, Springer, vol. 27(3), pages 197-221, November. [Downloadable!] (restricted)
  12. Rafael Moner Colonques & Ricardo Flores Fillol, 2006. "Strategic Effects Of Airline Alliances," Working Papers. Serie AD 2006-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  13. Felipe Balmaceda & Eduardo Saavedra, 2004. "Vertical Integration and Shared Facilities in Unregulated Industries," Documentos de Trabajo 195, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  14. Lerner, Josh & Tirole, Jean, 2003. "Efficient Patent Pools," IDEI Working Papers 211, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  15. Ricardo Flores-Fillol, 2007. "Airline Competition and Network Structure," UFAE and IAE Working Papers 683.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  16. W. Whalen, 2007. "A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets," Review of Industrial Organization, Springer, vol. 30(1), pages 39-61, February. [Downloadable!] (restricted)
  17. Volodymyr Bilotkach, 2007. "Issues in Network Development by National Airlines: The Case of Ukraine," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 61-80, January-F. [Downloadable!]
  18. Joseph A. Clougherty, 2005. "The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business," CIG Working Papers SP II 2005-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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  19. Brueckner, Jan K. & Pels, Eric, 2003. "Institutions, Regulation, and the Evolution of European Air Transport," Serie Research Memoranda 0010, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
  20. Dennis L. Weisman, 2005. "Market Concentration, Multi-Market Participation and Mergers in Network Industries," Review of Network Economics, Concept Economics, vol. 4(2), pages 129-141, June. [Downloadable!]
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