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Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry

Author

Listed:
  • Patrick Dennis
  • Kristopher S. Gerardi
  • Carola Schenone

Abstract

Institutional investors often own significant equity in firms that compete in the same product market. These \"common owners\" may have an incentive to coordinate the actions of firms that would otherwise be competing rivals, leading to anti-competitive pricing. This paper uses data on airline ticket prices to test whether common owners induce anti-competitive pricing behavior. We find little evidence to support such a hypothesis, and show that the positive relationship between average ticket prices and a commonly used measure of common ownership previously documented in the literature is generated by the endogenous market share component, rather than the ownership component, of the measure.

Suggested Citation

  • Patrick Dennis & Kristopher S. Gerardi & Carola Schenone, 2019. "Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry," FRB Atlanta Working Paper 2019-15, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2019-15
    DOI: 10.29338/wp2019-15
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    References listed on IDEAS

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    Cited by:

    1. Sertsios, Giorgo, 2020. "Corporate finance, industrial organization, and organizational economics," Journal of Corporate Finance, Elsevier, vol. 64(C).
    2. Shy, Oz & Stenbacka, Rune, 2019. "An OLG model of common ownership: Effects on consumption and investments," Journal of Macroeconomics, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    common ownership; airline prices; institutional ownership; competition;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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