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Do horizontal mergers induce entry? Evidence from the US airline industry

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  • Bougette, Patrice
  • Hüschelrath, Kai
  • Müller, Kathrin

Abstract

Theoretical research has investigated the relevance of entry-inducing effects as countervailing factor to a merger-related increase in market power. We use route-level data for the America West Airlines - US Airways merger (2005) to investigate whether such an effect can be identified empirically. Our results show that both entry-inducing and entry-dissuading effects can be observed depending on the type of affected route and the carrier under investigation.

Suggested Citation

  • Bougette, Patrice & Hüschelrath, Kai & Müller, Kathrin, 2013. "Do horizontal mergers induce entry? Evidence from the US airline industry," ZEW Discussion Papers 13-030, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:13030
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    References listed on IDEAS

    as
    1. Anthony M. Marino & Ján Zábojník, 2006. "Merger, Ease Of Entry And Entry Deterrence In A Dynamic Model," Journal of Industrial Economics, Wiley Blackwell, vol. 54(3), pages 397-423, September.
    2. Spector, David, 2004. "Competition and the capital-labor conflict," European Economic Review, Elsevier, pages 25-38.
    3. Cabral, Luis M. B., 2003. "Horizontal mergers with free-entry: why cost efficiencies may be a weak defense and asset sales a poor remedy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 607-623, May.
    4. Werden, Gregory J & Froeb, Luke M, 1998. "The Entry-Inducing Effects of Horizontal Mergers: An Exploratory Analysis," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 525-543, December.
    5. Spector, David, 2003. "Horizontal mergers, entry, and efficiency defences," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1591-1600, December.
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    More about this item

    Keywords

    Airline industry; merger; entry-inducing effects;

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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