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Benefits and Costs of Airline Mergers: A Case Study

Author

Listed:
  • Dennis W. Carlton
  • William M. Landes
  • Richard A. Posner

Abstract

This paper provides a methodology to analyze the potential benefits and costs of airline mergers. The methodology is applied to the recent merger between North Central Airlines and Southern Airways -- the superior product created by a merger which increases the amount of single-carrier versus multiple-carrier service. A conditional logit model of travel demand is used to estimate the benefit of the introduction of a superior product. Our analysis of possible costs (in reduced competition) focuses on the definition of the market and the significance of potential competition.

Suggested Citation

  • Dennis W. Carlton & William M. Landes & Richard A. Posner, 1980. "Benefits and Costs of Airline Mergers: A Case Study," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 65-83, Spring.
  • Handle: RePEc:rje:bellje:v:11:y:1980:i:spring:p:65-83
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    Cited by:

    1. repec:eee:transa:v:103:y:2017:i:c:p:444-454 is not listed on IDEAS
    2. 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.
    3. Achim I. Czerny & Peter-J. Jost & Benny Mantin, 2010. "Pricing in Overlapping Transport Networks," WHU Working Paper Series - Economics Group 10-05, WHU - Otto Beisheim School of Management.
    4. Zhang, Anming & Zhang, Yimin, 2002. "Issues on liberalization of air cargo services in international aviation," Journal of Air Transport Management, Elsevier, vol. 8(5), pages 275-287.
    5. Vaze, Vikrant & Luo, Tian & Harder, Reed, 2017. "Impacts of airline mergers on passenger welfare," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 130-154.
    6. Good, David H. & Nadiri, M. Ishaq & Sickles, Robin C., 1989. "The Structure Of Production, Technical Change And Efficiency In A Multiproduct Industry: An Application To U.S. Airlines," Working Papers 89-14, C.V. Starr Center for Applied Economics, New York University.
    7. Marti­n, Juan Carlos & Román, Concepción, 2003. "Hub location in the South-Atlantic airline market: A spatial competition game," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(10), pages 865-888, December.
    8. repec:bla:jindec:v:65:y:2017:i:2:p:336-362 is not listed on IDEAS
    9. JA. Clougherty, 2000. "US domestic airline alliances: does the national welfare impact turn on strategic international gains?," Contemporary Economic Policy, Western Economic Association International, vol. 18(3), pages 304-314, July.
    10. Adler, Nicole & Berechman, Joseph, 2001. "Evaluating optimal multi-hub networks in a deregulated aviation market with an application to Western Europe," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(5), pages 373-390, June.
    11. Jeffrey T. Prince & Daniel H. Simon, 2014. "The Impact of Mergers on Quality Provision: Evidence from the Airline Industry," Working Papers 2014-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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