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The Effects of Mergers on Prices, Costs, and Capacity Utilization in the U.S. Air Transportation Industry, 1970-84

  • Frank R. Lichtenberg
  • Moshe Kim

We analyze the effect of mergers on various aspects of airline performance during the period 1970-84, using a panel data set constructed by Caves et al. Estimates derived from a simple "matched pairs" statistical model indicate that these mergers were associated with reductions in unit cost. The average annual rate of unit cost growth of carriers undergoing merger was 1.1 percentage points lower, during the five-year period centered on the merger, than that of carriers not involved in merger. Almost all of this cost reduction appears to have been passed on to consumers. Part of the cost reduction is attributable to mergerrelated declines in the prices of inputs, particularly labor, but about two-thirds of it is due to increased total factor productivity. One source of the productivity improvement is an increase in capacity utilization (load factor).

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File URL: http://www.nber.org/papers/w3197.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3197.

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Date of creation: Dec 1989
Date of revision:
Publication status: published as Frank Lichtenberg, author, Corporate Takeovers and Productivity. Cambridge: MIT Press, forthcoming 1992, Chapter 8.
Handle: RePEc:nbr:nberwo:3197
Note: PR
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  1. Lichtenberg, F.R. & Siegel, D., 1989. "The Effect Of Takeovers On The Employment And Wages Of Central-Office And Other Personnel," Papers fb-_89-05, Columbia - Graduate School of Business.
  2. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 643-684.
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