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The competitive effects of firm exit: Evidence from the US airline industry

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  • Hüschelrath, Kai
  • Müller, Kathrin

Abstract

We study the competitive effects of five liquidations and six mergers in the domestic U.S. airline industry between 1995 and 2010. Applying fixed effects regression models we find that route exits due to liquidation lead to substantially larger price increases than mergerrelated exits. Within the merger category, our analysis reveals significant price increases on all affected routes immediately after the exit events. In the medium and long-run, however, realized merger efficiencies and entry-inducing effects are found to be strong enough to drive prices down to pre-exit levels.

Suggested Citation

  • Hüschelrath, Kai & Müller, Kathrin, 2012. "The competitive effects of firm exit: Evidence from the US airline industry," ZEW Discussion Papers 12-037, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:12037
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    References listed on IDEAS

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    Keywords

    airline industry; exit; liquidation; merger; efficiencies; entry-inducing effects;
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