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Entry deterrence due to brand proliferation: Empirical evidence from the German interurban bus industry

Author

Listed:
  • Samuel de Haas

    (Justus-Liebig-University Giessen)

  • Daniel Herold

    (Justus-Liebig-University Giessen)

  • Jan Thomas Schaefer

    (Justus-Liebig-University Giessen)

Abstract

In 2016, the largest operator in the German interurban bus industry, Flixbus, acquired its major rival, Postbus. We study the effects of that takeover using route-level data covering more than 6,000 routes. We find that Flixbus, on average, provided a lower frequency of bus rides and slightly decreased prices after the takeover. This indicates that Flixbus pursued a strategy of preemption: to decrease residual demand for Postbus, Flixbus offered a high number of bus rides. After the takeover, Flixbus decreased the supply of transportation services and lowered the prices to compensate the consumers for the resulting increase in inconvenience costs.

Suggested Citation

  • Samuel de Haas & Daniel Herold & Jan Thomas Schaefer, 2017. "Entry deterrence due to brand proliferation: Empirical evidence from the German interurban bus industry," MAGKS Papers on Economics 201731, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201731
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Competition; Takeover; Interurban Bus Services; Brand Proliferation; Entry Deterrence;
    All these keywords.

    JEL classification:

    • 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
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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