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The effects of airline alliances: What do the aggregate data say?

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  • Philippe Gagnepain

    (Departamento de Economía - UC3M - Universidad Carlos III de Madrid [Madrid], CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Pedro Marin

    (Departamento de Economía - UC3M - Universidad Carlos III de Madrid [Madrid])

Abstract

We consider an empirical model of worldwide airline alliances that we apply to a large set of companies for the period 1995-2000. Using observations at the network level, we estimate a cost, capacity, and demand system that accounts for cross-price elasticities. Our contribution consists in evaluating airlines' strategical interactions through the window of firms' network interconnections. We consider networks coincidences and potential connections with all their rivals. The results allow us to classify all company pairs as either complements or substitutes. We shed light on the fact that many airlines involved in the same alliance are potential substitutes.

Suggested Citation

  • Philippe Gagnepain & Pedro Marin, 2010. "The effects of airline alliances: What do the aggregate data say?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00622831, HAL.
    • Handle: RePEc:hal:cesptp:hal-00622831
    Note: View the original document on HAL open archive server: https://hal.science/hal-00622831
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    References listed on IDEAS

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    1. Marin, Pedro L., 1998. "Productivity differences in the airline industry: Partial deregulation versus short run protection," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 395-414, July.
    2. Oum, Tae Hoon & Park, Jong-Hun, 1997. "Airline alliances: current status, policy issues, and future directions," Journal of Air Transport Management, Elsevier, vol. 3(3), pages 133-144.
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    4. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research.
    5. Jaumandreu, Jordi & Lorences, Joaquin, 2002. "Modelling price competition across many markets (An application to the Spanish loans market)," European Economic Review, Elsevier, vol. 46(1), pages 93-115, January.
    6. 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.
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    9. Gagnepain, Philippe & Marin, Pedro L, 2006. "Regulation and Incentives in European Aviation," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 229-248, April.
    10. Good, David H & Roller, Lars-Hendrik & Sickles, Robin C, 1993. "U.S. Airline Deregulation: Implications for European Transport," Economic Journal, Royal Economic Society, vol. 103(419), pages 1028-1041, July.
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    Cited by:

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    2. Zou, Li & Chen, Xueqian, 2017. "The effect of code-sharing alliances on airline profitability," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 50-57.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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