Tuesday, July 12, 2011
Posted by D. Daniel Sokol
Xavier Fageda, University of Barcelona - Department of Economic Policy and Jordi Perdiguero, University of Barcelona provide An Empirical Analysis of a Merger between a Network and Low-Cost Airlines.
ABSTRACT:We use a difference-in-difference estimator to examine the effects of a merger involving three airlines. The novelty lies in the examination of this operation in two distinct scenarios: (1) on routes where two low-cost carriers and (2) on routes where a network and one of the low-cost airlines had previously been competing. We report a reduction in frequencies but no substantial effect on prices in the first scenario, while in the second we report an increase in prices but no substantial effect on frequencies. These results may be attributed to the differences in passenger types flying on these routes.