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An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances

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

Abstract

In this paper, we investigate empirically the effect of two recent domestic airline alliances. We find that both alliances benefited consumers - average fares fell and total traffic increased after the creation of the alliances on those city pairs affected by the alliances. We also find that these effects are found both on city pairs where the alliance created one or two new online carriers, and on city pairs where the alliance increased the service offered by one or both alliance partners. Finally, we find that the size of the fare effect of the alliance depends on the pre-alliance level of competition on a city pair with the effect being larger on those city pairs where the level of competition was relatively low.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8197.

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Date of creation: Mar 2001
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Publication status: published as Bamberger, Gustavo E & Carlton, Dennis W & Neumann, Lynette R, 2004. "An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances," Journal of Law & Economics, University of Chicago Press, vol. 47(1), pages 195-222, April.
Handle: RePEc:nbr:nberwo:8197

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Cited by:
  1. 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.
  2. 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.
  3. Austan Goolsbee & Chad Syverson, 2004. "How Do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," Working Papers 04-04, NET Institute, revised Dec 2004.
  4. 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.
  5. 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.
  6. 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.
  7. Max Gerlach & Catherine Cleophas & Natalia Kliewer, 2013. "Airline Codeshare Alliances," Business & Information Systems Engineering, Springer, vol. 5(3), pages 153-163, June.
  8. 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.
  9. 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.
  10. Chun, So Yeon & Kleywegt, Anton J & Shapiro, Alexander, 2011. "Revenue management in resource exchange seller alliances," MPRA Paper 34657, University Library of Munich, Germany.
  11. 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.
  12. Jan K. Brueckner & Stef Proost, 2009. "Carve-Outs Under Airline Antitrust Immunity," Working Papers 091004, University of California-Irvine, Department of Economics.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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.

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