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Analyzing the Effects of Temporary Antitrust Immunity: The Aloha-Hawaiian Immunity Agreement

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  • Rene Y. Kamita

Abstract

While several studies have examined the effects of cartels, in few instances are data available that allow us to examine postcartel behavior. In this paper, I use data on interisland airfares to examine the effects of an antitrust immunity agreement that allowed two airlines to coordinate capacity for a limited period of time. I find not only that prices rose during the period of coordination but that they remained high until the entry of a new competitor, 2 years after immunity expired. That the incumbent airlines were able to sustain supracompetitive fares well past the end of immunity suggests that even short-lived grants of immunity can have persistent effects. Policymakers should view even temporary grants of immunity with great skepticism, particularly in markets that already exhibit characteristics that may facilitate coordination. (c) 2010 by The University of Chicago. All rights reserved.

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  • Rene Y. Kamita, 2010. "Analyzing the Effects of Temporary Antitrust Immunity: The Aloha-Hawaiian Immunity Agreement," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 239-261, May.
  • Handle: RePEc:ucp:jlawec:v:53:y:2010:i:2:p:239-261
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    1. Alexander, Barbara, 1994. "The Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 245-254, May.
    2. Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
    3. Rodger D. Blair & James Mak & Carl Bonham, 2007. "Collusive Duopoly: The Economic Effects of Aloha and Hawaiian AirlinesÕ Agreement to Reduce Capacity," Working Papers 2007-1, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    4. Eads, George C, 1974. "Airline Capacity Limitation Controls: Public Vice or Public Virtue?," American Economic Review, American Economic Association, vol. 64(2), pages 365-371, May.
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