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Carve-outs under airline antitrust immunity

  • Brueckner, Jan K.
  • Proost, Stef

This paper offers the first formal economic analysis of carve-outs under airline antitrust immunity. Carve-outs are designed to limit the potential anticompetitive effects of cooperation by alliance partners in hub-to-hub markets, where they provide overlapping nonstop service. While the paper shows that carve-outs are beneficial when the alliance does not involve full integration of the partners' operations on the hub-to-hub route, its key point is that a carve-out may be harmful when imposed on a joint-venture alliance. A JV alliance involves full exploitation of economies of traffic density on the hub-to-hub route, and a carve-out prevents the realization of these benefits. While a carve-out may limit anticompetitive incentives on the hub-to-hub route, welfare may be reduced if the resulting gains are overshadowed by the efficiency loss generated by the carve-out.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 28 (2010)
Issue (Month): 6 (November)
Pages: 657-668

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Handle: RePEc:eee:indorg:v:28:y:2010:i:6:p:657-668
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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