Endogenous and Selective Service Choices After Airline Mergers

Sophia Ying Li; Joe Mazur; Yongjoon Park; James W. Roberts; Andrew Sweeting; Jun Zhang

doi:10.3386/w24214

Endogenous and Selective Service Choices After Airline Mergers

Sophia Ying Li, Joe Mazur, Yongjoon Park, James W. Roberts, Andrew Sweeting & Jun Zhang

Working Paper 24214

DOI 10.3386/w24214

Issue Date January 2018

We estimate a model of service choice and price competition in airline markets, allowing for the carriers that provide nonstop service to be a selected subset of the carriers competing in the market. Our model can be estimated without an excessive computational burden and we use the estimated model to illustrate the effects of selection on equilibrium market structure and to show how accounting for selection can change predictions about post-merger market power and repositioning, in ways that are consistent with what has been observed after actual mergers, and possible merger remedies.

Sweeting conducted some of this research during a five-month spell as an Academic Visitor at the US Department of Justice, whose hospitality is warmly acknowledged, although the paper does not reflect the views, opinions or practice of the Department. We thank a number of seminar participants and discussants for useful comments. The research has been supported by NSF Grant SES-1260876. An earlier version of this paper was circulated as “Airline Mergers and the Potential Entry Defense.” Peichun Wang provided excellent research assistance during an early phase of the project. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
MARC RIS BibTeΧ
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Endogenous and Selective Service Choices After Airline Mergers

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