Airline Networks, Mergers, and Consumer Welfare
34 Pages Posted: 30 Jun 2013
Date Written: 2013
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-in-differences 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 pre-merger overlap suggest that the merger led to a net increase in consumer welfare.
Keywords: airline industry, merger, market power, consumer welfare, price effects
JEL Classification: L40, L93
Suggested Citation: Suggested Citation
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