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Market competition and market price: Evidence from United/Continental airline merger

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  • Shen, Ying

Abstract

Using a difference-in-differences technique, this paper examines the relationship between market competition and market price in the airline industry by presenting a case study of United and Continental Airlines merger. I find that, in nonstop markets, the price for routes formerly competitive between United and Continental Airlines increases significantly following the merger. This result is robust after controlling for route-specific factors and using different samples and specifications. The market power effect dominates efficiency gains consistently throughout the whole merger process and after the merger was finalized. I also find that the increase in price is only on directly affected routes, not those out of adjacent airports. Since both United and Continental Airlines are legacy carriers, this paper provides informative results for future antitrust decision-making.

Suggested Citation

  • Shen, Ying, 2017. "Market competition and market price: Evidence from United/Continental airline merger," Economics of Transportation, Elsevier, vol. 10(C), pages 1-7.
    • Handle: RePEc:eee:ecotra:v:10:y:2017:i:c:p:1-7
    DOI: 10.1016/j.ecotra.2017.03.001
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    5. Ma, Wenliang & Wang, Qiang & Yang, Hangjun & Zhang, Yahua, 2020. "Evaluating the price effects of two airline mergers in China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).

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