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Code-sharing, Price Discrimination and Welfare Losses

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  • Achim I. Czerny

Abstract

Airlines frequently use code-share agreements allowing each other to market seats on flights operated by partner airlines. Regulation may allow code-share agreements with antitrust immunity (cooperative price setting), or without antitrust immunity, or not at all. I compare the relative welfare effects of these regulation regimes on complementary airline networks. A crucial point is that such agreements are used to identify and price-discriminate interline passengers. I find that interline passengers always benefit from code-share agreements while non-interline passengers are worse off. Furthermore, I show that the latter effect questions the overall usefulness of code-share agreements from a welfare perspective. © 2009 LSE and the University of Bath

Suggested Citation

  • Achim I. Czerny, 2009. "Code-sharing, Price Discrimination and Welfare Losses," Journal of Transport Economics and Policy, University of Bath, vol. 43(2), pages 193-212, May.
  • Handle: RePEc:tpe:jtecpo:v:43:y:2009:i:2:p:193-212
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    Citations

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    Cited by:

    1. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    2. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2015. "The effect of code-share agreements on the temporal profile of airline fares," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 42-54.
    3. Romain De Nijs, 2015. "Behavior-based price discrimination and customer information sharing," PSE Working Papers hal-01226250, HAL.
    4. Czerny, Achim I. & van den Berg, Vincent A.C. & Verhoef, Erik T., 2016. "Carrier collaboration with endogenous fleets and load factors when networks are complementary," Transportation Research Part B: Methodological, Elsevier, vol. 94(C), pages 285-297.
    5. Kawamori, Tomohiko & Lin, Ming Hsin, 2013. "Airline mergers with low cost carriers," Economics of Transportation, Elsevier, vol. 2(2), pages 63-71.
    6. Romain De Nijs, 2015. "Behavior-based price discrimination and customer information sharing," Working Papers hal-01226250, HAL.
    7. De Nijs, Romain, 2017. "Behavior-based price discrimination and customer information sharing," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 319-334.
    8. Adler, Nicole & Hanany, Eran, 2016. "Regulating inter-firm agreements: The case of airline codesharing in parallel networks," Transportation Research Part B: Methodological, Elsevier, vol. 84(C), pages 31-54.
    9. repec:eee:transa:v:103:y:2017:i:c:p:432-443 is not listed on IDEAS
    10. Achim I. Czerny & Vincent A.C. van den Berg & Erik T. Verhoef, 2015. "Complementary Alliances with Endogenous Fleets and Load Factors," Tinbergen Institute Discussion Papers 15-134/VIII, Tinbergen Institute.
    11. Anming Zhang & Yimin Zhang & Joseph A. Clougherty, 2011. "Competition and Regulation in Air Transport," Chapters,in: A Handbook of Transport Economics, chapter 35 Edward Elgar Publishing.
    12. 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.

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