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Competition Effects of Airport Slot-Swap: An Analysis of the Delta/US Airways Deal

Author

Listed:
  • Yongjoon Park

    (University of Massachusetts Amherst, Department of Resource Economics, Stockbridge Hall, 80 Campus Center Way, Amherst, MA, 01003)

Abstract

Carriers often exchange airport slots (a so-called slot swap) in order to expand their hub networks, but the exchange is often faced with competition-related concerns. In this study, I estimate an airline entry model that can analyze the effects of a slot swap on market competition, focusing on the deal between Delta and US Airways in 2011 at Ronald Reagan Washington Airport (DCA) and LaGuardia New York Airport (LGA). Counterfactual analysis suggests that a slot swap deal incentivizes carriers to change their network by actively adding/removing routes and hence has distributional effect on passengers in different routes. Also, remedies that force the exchanging party to give up some of their slots to rivals may increase consumer surplus, but excessive remedies may harm consumers.

Suggested Citation

  • Yongjoon Park, 2020. "Competition Effects of Airport Slot-Swap: An Analysis of the Delta/US Airways Deal," Working Papers 20-11, NET Institute.
    • Handle: RePEc:net:wpaper:2011
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    File URL: http://www.netinst.org/Park_20-11.pdf
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    References listed on IDEAS

    as
    1. Federico Ciliberto & Charles Murry & Elie Tamer, 2021. "Market Structure and Competition in Airline Markets," Journal of Political Economy, University of Chicago Press, vol. 129(11), pages 2995-3038.
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    3. Federico Ciliberto & Jonathan W. Williams, 2014. "Does multimarket contact facilitate tacit collusion? Inference on conduct parameters in the airline industry," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 764-791, December.
    4. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
    5. Thomas G. Wollmann, 2018. "Trucks without Bailouts: Equilibrium Product Characteristics for Commercial Vehicles," American Economic Review, American Economic Association, vol. 108(6), pages 1364-1406, June.
    6. Alon Eizenberg, 2014. "Upstream Innovation and Product Variety in the U.S. Home PC Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1003-1045.
    7. Katja Seim, 2006. "An empirical model of firm entry with endogenous product‐type choices," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 619-640, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Airport Slot Swap; Endogenous Entry; Static Games; Airlines; Network Effects;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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