Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, August 15, 2013

Airline networks, mergers, and consumer welfare

Posted by D. Daniel Sokol

Kai Huschelrath (ZEW) and Kathrin Muller (ZEW) study Airline networks, mergers, and consumer welfare.

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-indifferences 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 premerger overlap suggest that the merger led to a net increase in consumer welfare.

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