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Domestic Code Sharing, Alliances, and Airfares in the U.S. Airline Industry

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  • Harumi Ito
  • Darin Lee

Abstract

This paper examines the impact of domestic code-sharing alliances on airfares. Our analysis yields two novel and somewhat surprising findings that have yet to be documented in the literature. First, unlike with international code sharing, we find that the overwhelming majority of domestic code-share itineraries involve a single operating carrier, a phenomenon that we refer to as virtual code sharing. Second, we find that these virtual code-sharing itineraries are priced lower than itineraries operated and marketed by a single carrier in the same market. We suggest that carriers may be using virtual code sharing—in large part—as a generic product to compete for the most price-sensitive passengers.

Suggested Citation

  • Harumi Ito & Darin Lee, 2007. "Domestic Code Sharing, Alliances, and Airfares in the U.S. Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 355-380.
  • Handle: RePEc:ucp:jlawec:v:50:y:2007:p:355-380
    DOI: 10.1086/511318
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    References listed on IDEAS

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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;The Industrial Organization Society, vol. 16(4), pages 367-384, June.
    2. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
    3. 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.
    4. 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 503-545, October.
    5. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 239-256, May.
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