Airline industry , merger , market power , consumer welfare , price effects
Abstract:
We study the consumer welfare effects of mergers in airline networks. Based on the
development of a general classification of affected routes, we apply a difference-indifferences
approach to exemplarily investigate the price effects of the America West Airlines
- US Airways merger completed in 2005. We find that although average prices increased
substantially on routes in which both airlines competed either on a non-stop or one-stop basis
prior to the merger, substantial average price reductions observed for routes without any premerger
overlap suggest that the merger led to a net increase in consumer welfare.
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