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Mergers and Product Quality: Evidence from the Airline Industry

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  • Chen, Yongmin
  • Gayle, Philip

Abstract

Retrospective studies of horizontal mergers have focused on their price effects, leaving the important question of how mergers affect product quality largely unanswered. This paper empirically investigates this issue for two recent airline mergers: Delta/Northwest and Continental/United. Consistent with the theoretical premise that mergers improve coordination but diminish competitive pressure for quality provision, we find: (i) each merger is associated with a quality increase in markets where the merging firms did not compete pre-merger, but with a quality decrease in markets where they did; and (ii) the quality change can be a U-shaped function of the pre-merger competition intensity.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 51238.

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Date of creation: 04 Nov 2013
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Handle: RePEc:pra:mprapa:51238

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Keywords: Mergers; Product Quality; Airlines;

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