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The Price-Increasing Effects Of Domestic Code-Sharing Agreements For Non-Stop Airline Routes

Author

Listed:
  • David Gilo
  • Felice Simonelli

Abstract

This article assesses the impact of domestic code-sharing agreements on prices of non-stop flights in the United States. The article finds a positive and significant correlation between code-sharing agreements and the level of airfares, and considers this to be the outcome of two anticompetitive effects: (1) a “round table” effect, produced when the exchange of commercially sensitive information among code-sharing partners facilitates coordination and collusion; and (2) a “double marginalization” effect, produced when carriers use code sharing to add a mark-up over their marginal costs. The article identifies an increase in airfares charged by code-sharing partners of more than 5 percent attributable to the “round table” effect. On top of this, the article finds further price hikes attributable to the “double marginalization” effect: ticketing carriers involved in code-sharing flights charge fares more than 4 percent higher than fares set by their code-sharing partner and almost 10 percent higher than other airlines in the same market.

Suggested Citation

  • David Gilo & Felice Simonelli, 2015. "The Price-Increasing Effects Of Domestic Code-Sharing Agreements For Non-Stop Airline Routes," Journal of Competition Law and Economics, Oxford University Press, vol. 11(1), pages 69-83.
    • Handle: RePEc:oup:jcomle:v:11:y:2015:i:1:p:69-83.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhu023
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    Citations

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    Cited by:

    1. Federico Ciliberto & Emily E. Cook & Jonathan W. Williams, 2019. "Network Structure and Consolidation in the U.S. Airline Industry, 1990–2015," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 3-36, February.
    2. Adler, Nicole & Mantin, Benny, 2015. "Government and company contracts: The effect on service and prices in international airline markets," Economics of Transportation, Elsevier, vol. 4(3), pages 166-177.
    3. Benny Mantin & Eran Rubin, 2016. "Fare Prediction Websites and Transaction Prices: Empirical Evidence from the Airline Industry," Marketing Science, INFORMS, vol. 35(4), pages 640-655, July.
    4. Lu, Jin-Long & Yang, Chih-Wen, 2022. "Good or bad? Passenger feelings regarding code-share alliances among airlines," Journal of Air Transport Management, Elsevier, vol. 103(C).

    More about this item

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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