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An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances

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  • Bamberger, Gustavo E
  • Carlton, Dennis W
  • Neumann, Lynette R

Abstract

In this paper, we investigate empirically the effect of two domestic airline alliances. We find that both alliances benefited consumers--average fares fell by about 5-7 percent after the creation of the alliances on those city pairs affected by the alliances; we find that total traffic increased 6 percent after the creation of at least one of the alliances. We also find that the average fare and traffic effects arise in part because the alliance partners' rivals respond to the increased competition from an alliance. Finally, we find that the size of the alliance effect on average fares depends on the prealliance level of competition on a city pair, with the effect being larger on those city pairs where the level of competition was initially relatively low.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law and Economics.

Volume (Year): 47 (2004)
Issue (Month): 1 (April)
Pages: 195-222

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Handle: RePEc:ucp:jlawec:y:2004:v:47:i:1:p:195-222

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Cited by:
  1. Ray Sturm & Drew Winters, 2009. "Does time have value? An empirical examination of the put option embedded in refundable U.S. air fares," Journal of Economics and Finance, Springer, vol. 33(4), pages 376-392, October.
  2. Chun, So Yeon & Kleywegt, Anton & Shapiro, Alexander, 2013. "Resource Exchange Seller Alliances," MPRA Paper 49759, University Library of Munich, Germany.
  3. Austan Goolsbee & Chad Syverson, 2008. "How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1611-1633, November.
  4. 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.
  5. Severin Borenstein & Nancy L. Rose, 2007. "How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry," NBER Working Papers 13452, National Bureau of Economic Research, Inc.
  6. 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.
  7. repec:hal:cesptp:hal-00622831 is not listed on IDEAS
  8. Jan K. Brueckner & Stef Proost, 2009. "Carve-Outs under Airline Antitrust Immunity," CESifo Working Paper Series 2848, CESifo Group Munich.
  9. Du, Yan & McMullen, B. Starr & Kerkvliet, Joe R., 2008. "The economic impact of the ATA/Southwest Airlines code-share agreement," Research in Transportation Economics, Elsevier, vol. 24(1), pages 51-60.
  10. 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.
  11. Ito, Harumi & Lee, Darin, 2005. "Domestic codesharing practices in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 11(2), pages 89-97.
  12. 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.
  13. Goetz, Christopher F. & Shapiro, Adam Hale, 2012. "Strategic alliance as a response to the threat of entry: Evidence from airline codesharing," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 735-747.
  14. Severin Borenstein & Nancy L. Rose, 2013. "How Airline Markets Work…or Do They? Regulatory Reform in the Airline Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 63-135 National Bureau of Economic Research, Inc.
  15. Jan Brueckner & Darin Lee & Ethan Singer, 2014. "City-Pairs Versus Airport-Pairs: A Market-Definition Methodology for the Airline Industry," Review of Industrial Organization, Springer, vol. 44(1), pages 1-25, February.
  16. Claudio Agostini, 2005. "El Mercado de Transporte Aéreo: Lecciones para Chile de una Revisión de la Literatura," ILADES-Georgetown University Working Papers inv163, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  17. Jiang, Changmin & Zhang, Anming, 2014. "Effects of high-speed rail and airline cooperation under hub airport capacity constraint," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 33-49.
  18. Max Gerlach & Catherine Cleophas & Natalia Kliewer, 2013. "Airline Codeshare Alliances," Business & Information Systems Engineering, Springer, vol. 5(3), pages 153-163, June.

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