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Multimarket Contact and Market Power Implications in the US Airline Industry

Author

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  • Jules Yimga

    (Embry-Riddle Aeronautical University)

Abstract

We investigate the impact of multimarket contact on market power. We analyze this question in the U.S. airline industry where concomitant cross-market interactions among competing carriers abound. Collecting data from the U.S. Bureau of Transportation Statistics and exploiting a methodology that allows us to compute the Lerner index (proxy for market power), we find that multimarket contact between carriers has a U-shaped effect on market power. This suggests that there exists a threshold level of multimarket contact for carriers that compete across multiple markets to recognize their interdependences and begin to mutually forbear.

Suggested Citation

  • Jules Yimga, 2023. "Multimarket Contact and Market Power Implications in the US Airline Industry," Networks and Spatial Economics, Springer, vol. 23(4), pages 985-1024, December.
    • Handle: RePEc:kap:netspa:v:23:y:2023:i:4:d:10.1007_s11067-023-09601-3
    DOI: 10.1007/s11067-023-09601-3
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