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Airline Network Effects and Consumer Welfare

Listed author(s):
  • Israel Mark
  • Keating Bryan

    (Compass Lexecon, District of Columbia, USA)

  • Rubinfeld Daniel L.

    ()

    (University of California, Berkeley, Law School Berkeley, USA)

  • Willig Bobby

    (Princeton University, Woodrow Wilson School Princeton, New Jersey, USA)

Registered author(s):

    In this paper we develop a methodology to quantify the value to consumers of the non-price characteristics of airline networks. Our research demonstrates that analyses that ignore the quality effects associated with expanded airline networks generate incorrect findings and thus should not form the basis for policy decisions regarding airline transactions. Appropriately incorporating quality effects into quality-adjusted fares reverses the conclusion that hub airports yield lower consumer welfare due to generally higher fares than other airports. From the perspective of consumer welfare in this industry, to evaluate potential airline mergers, alliances, slot swaps or other transactions, one should not focus solely on the effect of concentration on nominal fares, rather, one should account for the welfare-enhancing effects of larger airline networks.

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    File URL: https://www.degruyter.com/view/j/rne.2013.12.issue-3/rne-2013-0110/rne-2013-0110.xml?format=INT
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    Article provided by De Gruyter in its journal Review of Network Economics.

    Volume (Year): 12 (2013)
    Issue (Month): 3 (November)
    Pages: 287-322

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    Handle: RePEc:bpj:rneart:v:12:y:2013:i:3:p:287-322:n:4
    Contact details of provider: Web page: https://www.degruyter.com

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    14. Peters, Craig, 2006. "Evaluating the Performance of Merger Simulation: Evidence from the U.S. Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 627-649, October.
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