IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04709710.html

Price Competition and Endogenous Product Choice in Networks: Evidence from the US Airline Industry

Author

Listed:
  • Christian Bontemps

    (ENAC-LAB - Laboratoire de recherche ENAC - ENAC - Ecole Nationale de l'Aviation Civile, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Cristina Gualdani

    (QMUL - Queen Mary University of London)

  • Kevin Remmy

    (University of Mannheim = Universität Mannheim)

Abstract

We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between American Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes.

Suggested Citation

  • Christian Bontemps & Cristina Gualdani & Kevin Remmy, 2022. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US Airline Industry," Post-Print hal-04709710, HAL.
    • Handle: RePEc:hal:journl:hal-04709710
    Note: View the original document on HAL open archive server: https://hal.science/hal-04709710v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04709710v1/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Harold D. Chiang & Jack Collison & Lorenzo Magnolfi & Christopher Sullivan, 2025. "Enhancing the Merger Simulation Toolkit with ML/AI," Papers 2506.05225, arXiv.org.
    3. Gaurab Aryal & Anirban Chattopadhyaya & Federico Ciliberto, 2025. "Bridging Quasi-Experimental and Structural Approaches for Robust Evaluation of US Airline Mergers," Papers 2503.15785, arXiv.org, revised Oct 2025.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-04709710. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.