Repositioning and market power after airline mergers

Journal Article (Journal Article)

We estimate a model of route-level competition between airlines who choose whether to offer nonstop or connecting service before setting prices. Airlines have full information about all quality, marginal cost, and fixed cost unobservables throughout the game, so that service choices will be selected on these residuals. We conduct merger simulations that allow for repositioning and account for the selection implied by the model and the data. Accounting for selection materially affects the predicted likelihood of repositioning and the predicted magnitude of post-merger price changes, and it allows us to match what has been observed after consummated mergers.

Full Text

Duke Authors

Cited Authors

  • Li, S; Mazur, J; Park, Y; Roberts, J; Sweeting, A; Zhang, J

Published Date

  • March 1, 2022

Published In

Volume / Issue

  • 53 / 1

Start / End Page

  • 166 - 199

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

International Standard Serial Number (ISSN)

  • 0741-6261

Digital Object Identifier (DOI)

  • 10.1111/1756-2171.12404

Citation Source

  • Scopus