Airline Networks, Mergers, and Consumer Welfare

34 Pages Posted: 30 Jun 2013

See all articles by Kai Hüschelrath

Kai Hüschelrath

ZEW – Leibniz Centre for European Economic Research

Kathrin Mueller

ZEW – Leibniz Centre for European Economic Research

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

Hüschelrath, Kai and Mueller, Kathrin, Airline Networks, Mergers, and Consumer Welfare (2013). ZEW - Centre for European Economic Research Discussion Paper No. 28, Available at SSRN: https://ssrn.com/abstract=2278852 or http://dx.doi.org/10.2139/ssrn.2278852

Kai Hüschelrath (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Kathrin Mueller

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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