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The effects of airline alliances: What do the aggregate data say?

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  • Philippe Gagnepain

    ()
    (Departamento de Economía - Universidad Carlos III de Madrid, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Pedro Marin

    (Departamento de Economía - Universidad Carlos III de Madrid)

Abstract

We 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 network level, we estimate a cost, capacity, and demand system that accounts for cross-price elasticities. Our contribution consists in evaluating airlines' strategical interactions through the window of firms' network interconnections. We consider networks coincidences and potential connections with all their rivals. The results allow us to classify all company pairs as either complements or substitutes. We shed light on the fact that many airlines involved in the same alliance are potential substitutes.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00622831.

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Date of creation: 2010
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Publication status: Published, SERIES Journal of the Spanish Economic Association, 2010, 1, 251-276
Handle: RePEc:hal:cesptp:hal-00622831

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00622831
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  1. Neven, Damien J. & Roller, Lars-Hendrik, 1996. "Rent sharing in the European airline industry," European Economic Review, Elsevier, Elsevier, vol. 40(3-5), pages 933-940, April.
  2. Gagnepain, Philippe & Marín Uribe, Pedro Luis, 2004. "Regulation and Incentives in European Aviation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4318, C.E.P.R. Discussion Papers.
  3. Roller, Lars-Hendrik & Sickles, Robin C., 2000. "Capacity and product market competition: measuring market power in a 'puppy-dog' industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(6), pages 845-865, August.
  4. Bamberger, Gustavo E & Carlton, Dennis W & Neumann, Lynette R, 2004. "An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 47(1), pages 195-222, April.
  5. 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, Springer, vol. 30(1), pages 39-61, February.
  6. David Genesove & Wallace P. Mullin, 1998. "Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 355-377, Summer.
  7. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
  8. 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.
  9. Oum, Tae Hoon & Park, Jong-Hun, 1997. "Airline alliances: current status, policy issues, and future directions," Journal of Air Transport Management, Elsevier, Elsevier, vol. 3(3), pages 133-144.
  10. Good, David H & Roller, Lars-Hendrik & Sickles, Robin C, 1993. "U.S. Airline Deregulation: Implications for European Transport," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(419), pages 1028-41, July.
  11. 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.
  12. Marin, Pedro L., 1998. "Productivity differences in the airline industry: Partial deregulation versus short run protection," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(4), pages 395-414, July.
  13. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research.
  14. Jaumandreu, Jordi & Lorences, Joaquin, 2002. "Modelling price competition across many markets (An application to the Spanish loans market)," European Economic Review, Elsevier, Elsevier, vol. 46(1), pages 93-115, January.
  15. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(10), pages 1475-1498, December.
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