The effects of airline alliances: What do the aggregate data say?
AbstractWe consider an empirical model of worldwide airline alliances that we apply to a large set of companies for the period 1995-2000. Using observations at the companies level, we estimate a cost, capacity, and demand system that accounts for cross-price elasticities. From the estimates, we shed light on the fact that many airlines involved in the same alliances are potential substitutes. We also test for the effects of alliances on airlines’ fares and suggest that airlines inside alliances cut prices by 5% on average compared to airlines outside alliances. Finally, we construct price-cost margins for each airlines and suggest that current pricing habits are not uniform and vary from one alliance to another.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we096540.
Date of creation: Apr 2009
Date of revision:
alliances; airline; cross-price elasticities; Nash behavior;
Other versions of this item:
- 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.
- Philippe Gagnepain & Pedro Marin, 2010. "The effects of airline alliances: What do the aggregate data say?," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00622831, HAL.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
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