Friday, September 3, 2010
Posted by D. Daniel Sokol
Rene Y. Kamita has an interesting paper on Analyzing the Effects of Temporary Antitrust Immunity: The Aloha‐Hawaiian Immunity Agreement.
ABSTRACT: While several studies have examined the effects of cartels, in few instances are data available that allow us to examine postcartel behavior. In this paper, I use data on interisland airfares to examine the effects of an antitrust immunity agreement that allowed two airlines to coordinate capacity for a limited period of time. I find not only that prices rose during the period of coordination but that they remained high until the entry of a new competitor, 2 years after immunity expired. That the incumbent airlines were able to sustain supracompetitive fares well past the end of immunity suggests that even short‐lived grants of immunity can have persistent effects. Policymakers should view even temporary grants of immunity with great skepticism, particularly in markets that already exhibit characteristics that may facilitate coordination.