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Code-sharing, price discrimination and welfare losses

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  • Achim I. Czerny

Abstract

Airlines frequently use code-share agreements allowing each other to market seats on flights operated by partner airlines. Regulation may allow code-share agreements with antitrust immunity (cooperative price setting), or without antitrust immunity, or not at all. I compare relative welfare effects of these regulation regimes for complementary airline networks. A crucial point is that such agreements are used to identify and price discriminate interline passengers. I find that interline passengers always benefit from code-share agreements while non-interline passengers are worse off. Furthermore, I show that the second effect questions the overall usefulness of code-share agreements from a welfare perspective.

Suggested Citation

  • Achim I. Czerny, 2008. "Code-sharing, price discrimination and welfare losses," WHU Working Paper Series - Economics Group 08-05, WHU - Otto Beisheim School of Management.
    • Handle: RePEc:whu:wpaper:08-05
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    File URL: https://nbn-resolving.org/urn:nbn:de:hbz:992-opus4-5171
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    References listed on IDEAS

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    More about this item

    Keywords

    Airlines; alliances; code-share agreements; antitrust immunity; price discrimination;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • 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
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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