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Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy

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  • Gayle, Philip G.
  • Thomas, Tyson

Abstract

Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). While cooperation may yield benefits, it can also have anti-competitive effects in markets where partners competed prior to receiving ATI. A carve-out policy forbids ATI partners from cooperating in markets policymakers believe will be most harmed by anti-competitive effects. We examine carve-out policy applications to three ATI partner pairings, and find evidence more consistent with cooperative pricing in carve-out markets in spite of the policy, calling into question the effectiveness of the policy in achieving intended market outcomes.

Suggested Citation

  • Gayle, Philip G. & Thomas, Tyson, 2016. "Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 178-194.
    • Handle: RePEc:eee:jeborg:v:128:y:2016:i:c:p:178-194
    DOI: 10.1016/j.jebo.2016.05.007
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    Cited by:

    1. repec:eee:ecotra:v:14:y:2018:i:c:p:31-41 is not listed on IDEAS
    2. Gayle, Philip & Xie, Xin, 2018. "Firms’ Markup, Cost, and Price Changes when Policymakers Permit Collusion: Does Antitrust Immunity Matter?," MPRA Paper 89914, University Library of Munich, Germany.

    More about this item

    Keywords

    Airline competition; Antitrust immunity; Carve-out policy;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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