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The international drivers of domestic airline mergers in twenty nations: integrating industrial organization and international business

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  • Joseph A. Clougherty

    (Wissenschaftszentrum Berlin (WZB), Germany)

Abstract

The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization (IO) literature; yet, that literature neglected non-US domestic mergers and potential for international competitive gains. Using an International Business perspective to complement an IO analysis, I argue that factoring international competitive incentives helps explain domestic airline merger activity. A Cournot model of airline competition illustrates that domestic mergers, via enhanced domestic networks and reduced domestic competition, generate international competitive gains. Further, empirical tests-using a structural equations approach on panel data covering interhyphen-national city-pair market segments-support domestic mergers improving international competitiveness. Copyright © 2006 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 1 ()
Pages: 75-93

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Handle: RePEc:wly:mgtdec:v:27:y:2006:i:1:p:75-93

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Clougherty, Joseph A., 2002. "US domestic airline mergers: the neglected international determinants," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(4), pages 557-576, April.
  2. Morrison, Steven A & Winston, Clifford, 1987. "Empirical Implications and Tests of the Contestability Hypothesis," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 30(1), pages 53-66, April.
  3. Joseph A Clougherty, 2001. "Globalization and the Autonomy of Domestic Competition Policy: An Empirical Test on the World Airline Industry," Journal of International Business Studies, Palgrave Macmillan, vol. 32(3), pages 459-478, September.
  4. Brander, James A. & Zhang, Anming, 1993. "Dynamic oligopoly behaviour in the airline industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 11(3), pages 407-435, September.
  5. Cason, Timothy N., 1994. "The strategic value of asymmetric information access for cournot competitors," Information Economics and Policy, Elsevier, Elsevier, vol. 6(1), pages 3-24, March.
  6. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 14(3), pages 371-89, August.
  7. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 43(2), pages 503-45, October.
  8. Windle, Robert J. & Dresner, Martin E., 1992. "Partial productivity measures and total factor productivity in the air transport industry: Limitations and uses," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 26(6), pages 435-445, November.
  9. Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
  10. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 549-69, June.
  11. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 9(3), pages 323-342, September.
  12. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, American Economic Association, vol. 71(2), pages 268-72, May.
  13. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 37(2), pages 379-415, October.
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Cited by:
  1. Clougherty, Joseph A. & Zhang, Anming, 2008. "Domestic Rivalry and Export Performance: Theory and Evidence from International Airline Markets," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 225, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Melnik, Arie & Shy, Oz & Stenbacka, Rune, 2008. "Assessing market dominance," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 68(1), pages 63-72, October.

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