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A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets

  • W. Whalen

    ()

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    This paper estimates the effects of code-sharing, antitrust immunity, and Open Skies treaties on prices, output, and capacity using an eleven-year panel of U.S.-Europe data. Code-sharing and immunized alliances are found to have significantly lower prices than does traditional interline (multi-carrier) service, but the effects are smaller in magnitude than those found in previous results that rely on cross-sectional data. Statistical tests that prices for immunized alliance service are equal to online (single carrier) service often cannot be rejected, providing additional evidence that immunity grants allow immunized carriers to internalize a double marginalization problem. Estimated output effects, consistent with the price effects, show that alliances are associated with large increases in passenger volumes. Lastly, estimates suggest that capacity expansions associated with “Open Skies” treaties are due entirely to expansion by immunized carriers on routes between their hubs. Copyright Springer Science+Business Media, LLC 2007

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    File URL: http://hdl.handle.net/10.1007/s11151-007-9125-0
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    Article provided by Springer in its journal Review of Industrial Organization.

    Volume (Year): 30 (2007)
    Issue (Month): 1 (February)
    Pages: 39-61

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    Handle: RePEc:kap:revind:v:30:y:2007:i:1:p:39-61
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100336

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    1. Jong-Hun Park & Anming Zhang, 2000. "An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets," Review of Industrial Organization, Springer, vol. 16(4), pages 367-384, June.
    2. Volodymyr Bilotkach, 2005. "Price Competition between International Airline Alliances," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 39(2), pages 167-190, May.
    3. Park, Jong-Hun, 1997. "The effects of airline alliances on markets and economic welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(3), pages 181-195, September.
    4. Bamberger, Gustavo E & Carlton, Dennis W & Neumann, Lynette R, 2004. "An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 195-222, April.
    5. Jan K. Brueckner, 2003. "International Airfares in the Age of Alliances: The Effects of Codesharing and Antitrust Immunity," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 105-118, February.
    6. Brueckner, Jan K & Whalen, W Tom, 2000. "The Price Effects of International Airline Alliances," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 503-45, October.
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