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The competitive effects of firm exit

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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 merger-related 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, 2013. "The competitive effects of firm exit," Economics of Transportation, Elsevier, vol. 2(2), pages 72-85.
    • Handle: RePEc:eee:ecotra:v:2:y:2013:i:2:p:72-85
    DOI: 10.1016/j.ecotra.2013.05.001
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    References listed on IDEAS

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    Cited by:

    1. Rafael Rocha Oliveira & Claudio Lucinda, 2024. "How do incumbents react to the exit of a potential competitor? Evidence from the airline sector," Working Papers, Department of Economics 2024_04, University of São Paulo (FEA-USP).

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