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Bankruptcy and Product-Market Competition: Evidence from the Airline Industry

  • Ciliberto, Federico
  • Schenone, Carola

We investigate the effects of Chapter 11 bankruptcy filings on product market competition using data from the US airline industry. We find that bankrupt airlines permanently downsize their national route structure, their airport-specific networks, and their route-specific flight frequency and capacity. We also find that bankrupt airlines lower their route-specific prices while under bankruptcy protection, and increase them after emerging. We do not find robust evidence of significant changes by the bankrupt airline's competitors along any of the dimensions above. Overall, our results are consistent with the hypothesis that bankruptcy is the result of a war of attrition over capacity and network cutbacks.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24914.

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Date of creation: 12 Aug 2010
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Handle: RePEc:pra:mprapa:24914
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