Antitrust & Competition Policy Blog

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

Monday, October 2, 2017

The Fiction of Locally Owned Mom and Pop Car Dealers: Some Data on Franchised Automobile Distribution in the State of Michigan

Dan Crane, U Michigan explains The Fiction of Locally Owned Mom and Pop Car Dealers: Some Data on Franchised Automobile Distribution in the State of Michigan.

ABSTRACT: The State of Michigan is currently defending a constitutional challenge to its automobile direct distribution prohibition. The lawsuit was brought by the automotive manufacturer Tesla, which has been denied a license to open show rooms or service centers in the state. A 2014 amendment to Michigan’s vehicle franchise statute tightened the statute’s direct distribution prohibition to make clear that even a manufacturer like Tesla that did not franchise dealers at all is prohibited from opening its own showrooms or service centers and dealing directly with consumers in the state. That law has been widely criticized by economists, consumer protection organizations like the Federal Trade Commission and Consumer Federation of America, environmental groups like the Sierra Club, and free market organizations like the Institute for Justice.


In the Michigan litigation, the State is expected to rely on the assertion, frequently made by the dealers’ lobbyists, that maintaining a locally owned dealership system is beneficial to the State. Such assertions are grounded in the trope of the atomistic “mom and pop” dealer of American economic folklore — the family-owned, locally rooted dealership. This justification is increasingly a fiction. While some such dealerships may still exist, Michigan law does not require dealerships to be locally owned and operated or independent from other economic enterprises. Many are not.

October 2, 2017 | Permalink | Comments (0)

Fair and Unfair Discrimination in Royalties for Standard-Essential Patents Encumbered by a FRAND or RAND Commitment

Greg Sidak, Criterion Economics has a paper on Fair and Unfair Discrimination in Royalties for Standard-Essential Patents Encumbered by a FRAND or RAND Commitment.

ABSTRACT: Once committed to a standard-setting organization (SSO), a standard-essential patent (SEP) is typically subject to its owner’s contractual commitment to the SSO to offer to license the SEP on terms that are reasonable and nondiscriminatory (RAND) to all implementers of the standard.1 Through the 2000s and earlier 2010s, most scholarship directed toward defining a RAND royalty focused more on the question of reasonableness than on the question of nondiscrimination. The same is true of fair, reasonable, and nondiscriminatory (FRAND) royalties for SEPs, whose slightly different moniker turns out, as we shall see in the following pages, to have greater significance than is commonly understood. This article provides a legal and economic analysis of the meaning of discrimination as defined in the FRAND or RAND commitments of the most prominent SSOs, such as the European Telecommunications Standards Institute (ETSI), the Institute of Electrical and Electronics Engineers (IEEE), and the Joint Electron Device Engineering Council (JEDEC). I distinguish between (1) normative arguments that scholars and expert economic witnesses have made about what they think “nondiscrimination” should mean, and (2) positive principles rooted in contract law or drawn from other fields of law in which statutes, courts, or regulators have defined what unlawful discrimination actually is. I argue that a positive jurisprudence on nondiscrimination exists in the United States, with common principles spanning fields as disparate as equal protection, civil rights law, tax law, antitrust law, and public utility regulation. After recognizing and using that positive jurisprudence on nondiscrimination, courts will find that the remaining questions of first impression in RAND or FRAND disputes can be enlightened by (admittedly normative) economic analysis. However, this residual role for normative economic analysis of law will be much more focused than what one commonly has observed to date in the often extravagant arguments of scholars and expert economic witnesses opining on what the FRAND or RAND commitment supposedly dictates for royalties for SEPs.

October 2, 2017 | Permalink | Comments (0)

Sunday, October 1, 2017

U.S. Antitrust Law Is Not Broken: Democrats want to fix it for the wrong reasons.

Friday, September 29, 2017

The Normative Foundations of European Competition Law Assessing the Goals of Antitrust through the Lens of Legal Philosophy

Oles Andriychuk, University of Stirling has written on The Normative Foundations of European Competition Law Assessing the Goals of Antitrust through the Lens of Legal Philosophy.

BOOK ABSTRACT: Does the competitive process constitute an autonomous societal value, or is it a means for achieving more reliable and measurable goals such as welfare, growth, integration, and innovation? This insightful book addresses this question from philosophical, legal and economic perspectives and demonstrates exactly why the competitive process is a value independent from other legitimate antitrust goals.


Oles Andriychuk consolidates the normative theories surrounding freedom, market and competition by assessing their effective use within the matrix of EU competition policy. He outlines the broader context of the phenomenon of competition such as its pivotal role in the electoral system and its implications for free speech, and then goes on to investigate its relationship with the proponents of various antitrust-related goals. Further to this, some relevant solutions to persistent regulatory problems of antitrust are discussed.


Timely and thought provoking, this book will be of interest to both students and scholars of European competition law, as well as those who are curious about its philosophical foundations. Offering deep insights into the nature of the competitive process, it will also appeal to judges and politicians weighing up antitrust goals.

 

September 29, 2017 | Permalink | Comments (0)

Monopolistic Competition When Income Matters

Monopolistic Competition When Income Matters.

Paolo Bertoletti, University of Pavia - Department of Political Economy and Quantitative Methods and Federico Etro, Ca Foscari University of Venice have written on Monopolistic Competition When Income Matters.

Abstract: We analyse monopolistic competition when consumers have an indirect utility that is additively separable. This leads to markups depending on income (both in the short and long run) but not on the market size, which generates pricing to market, incomplete pass‐through and pure gains from variety for countries that open up to trade. Firms’ heterogeneity à la Melitz implies a Darwinian effect of consumers’ spending on business creation and a Linderian effect on (endogenous) quality provision. We discuss extensions with an outside good and heterogenous agents, and offer simple and tractable specifications (linear or log‐linear) of the demand functions.

September 29, 2017 | Permalink | Comments (0)

Why (not) talk about the sociology of competition?

Guilherme Teno Castilho Misale & Yan Villela Vieira ask Why (not) talk about the sociology of competition?

Download Why we should (not) talk about sociology of competition

September 29, 2017 | Permalink | Comments (0)

Thursday, September 28, 2017

Competition and Globalization in Developing Countries

Concurrences Review, in partnership with New York University School of Law, will hold their annual joint conference Competition and Globalization in Developing Countries on Friday, October 27 from 8:30 am to 6:30 pm at New York University School of Law, 40 Washington Square South New York, NY.

 

Speakers include:

 

Tembinkosi BONAKELE | Commissioner, South African Competition Commission, Pretoria
Frédéric JENNY | Professor of Economics, ESSEC Business School | Chairman, OECD Competition Committee, Paris
Ioannis LIANOS  | Professor, University College London  
Paul CSISZAR | Director Pharma and Health Services Antitrust Unit, DG COMP, Brussels
Susan JONES | Head Corporate Legal Antitrust, Novartis, Basel
Martha Martinez LICETTI | Competition Policy Team Leader, World Bank Group, Washington, DC
Simon ROBERTS  | Professor of Economics, University of Johannesburg
Rosie LIPSCOMB | Senior Competition Counsel, Google, San Francisco
Jason WU | Vice President, Compass Lexecon, Princeton
Cristiane SCHMIDT | Commissioner, CADE, Brasilia
Francis Wang’ombe KARIUKI | Director General, Competition Authority of Kenya, Nairobi
Felipe IRARRÁZABAL PHILIPPI | National Economic Prosecutor, Fiscalia Nacional Economica, Santiago de Chile
Elizabeth KRAUS | Deputy Director for International Antitrust, US FTC, Washington, DC

 

There will be five panels:
  • Impact of the New Nationalism on Competition and Economic Development in Developing Countries
  • Pharmaceuticals: Pricing and Access
  • Mergers: Impact on Development
  • Innovation and Technology: The Next Frontier on Antitrust for Developing Countries?
  • Enforcers’ Roundtable: What’s under the Radar?

 

You can find the detailed program on the dedicated website: https://antitrust-developing-countries.eventbrite.com

September 28, 2017 | Permalink | Comments (0)

Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets

Kate Ho and Robin S. Lee have written on Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets.

ABSTRACT: Why do insurers choose to exclude medical providers, and when would this be socially desirable? We examine network design from the perspective of a profit-maximizing insurer and a social planner to evaluate the welfare effects of narrow networks and restrictions on their use. An insurer may engage in exclusion to steer patients to less expensive providers, cream-skim enrollees, and negotiate lower reimbursement rates. Private incentives for exclusion may diverge from social incentives: in addition to the standard quality distortion arising from market power, there is a "pecuniary" distortion introduced when insurers commit to restricted networks in order to negotiate lower rates. We introduce a new bargaining solution concept for bilateral oligopoly, Nash-in-Nash with Threat of Replacement, that captures such bargaining incentives and rationalizes observed levels of exclusion. Pairing our framework with hospital and insurance demand estimates from Ho and Lee (2017), we compare social, consumer, and insurer-optimal hospital networks for the largest non-integrated HMO carrier in California across several geographic markets. We find that both an insurer and consumers prefer narrower networks than the social planner in most markets. The insurer benefits from lower negotiated reimbursement rates (up to 30% in some markets), and consumers benefit when savings are passed along in the form of lower premiums. A social planner may prefer a broader network if it encourages the utilization of more efficient insurers or providers. We predict that, on average, network regulation prohibiting exclusion has no significant effect on social surplus but increases hospital prices and premiums and lowers consumer surplus. However, there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.

September 28, 2017 | Permalink | Comments (0)

Progressive Antitrust

Herbert J. Hovenkamp, Univ. of Pennsylvania Law and Wharton Business offers thoughts on Progressive Antitrust.

ABSTRACT: Several American political candidates and administrations have both run and served under the “progressive” banner for more than a century, right through the 2016 election season. For the most part these have pursued interventionist antitrust policies, reflecting a belief that markets are fragile and in need of repair, that certain interest groups require greater protection, or in some cases that antitrust policy is an extended arm of regulation. This paper argues that most of this progressive antitrust policy was misconceived, including that reflected in the 2016 antitrust plank of the Democratic Party. The progressive state is best served by a fundamentally neoclassical antitrust policy whose principal goal is the preservation of market competition as measured by consumer welfare.

Overall, progressive administrations have produced an impressive economic record, at least when compared with real world alternatives. For example, economic growth and job creation during Democrat administrations has been roughly double that than during Republican administrations. But the progressive record in antitrust policy tells a different story, particularly prior to the Clinton administration. Not only have progressives been expansionist in antitrust policy, they also pursued policies that did not fit well into any coherent vision of the economy, often in ways that hindered rather than furthered competitiveness and economic growth. In fact, for much of its history progressive antitrust policy has exhibited fairly strong special interest protectionism.

What should be the role of antitrust in a progressive economy that is more intensively regulated than the one that existed when the antitrust laws were passed? Antitrust could pursue one of three very general routes. First, what it has historically done is develop interventionist approaches that recognize many of the same goals and interest group pressures as regulatory policy generally. Second, it could pursue internally a set of essentially neoclassical goals, limiting its own decision making to markets in which the government has not asserted conflicting regulatory policies. Or third, it could act as a “super-enforcer” of competition, actually limiting or disciplining regulation that conflicts with its own neoclassical principles. The approach suggested here is a version of the second, provided that care be taken to distinguish public from private conduct.

September 28, 2017 | Permalink | Comments (0)

Procompetitive Justifications in Antitrust Law

John M. Newman, University of Memphis - Cecil C. Humphreys School of Law has written Procompetitive Justifications in Antitrust Law.  This paper is interesting.

ABSTRACT: The rule of reason has come to dominate modern antitrust law. Rule-of-reason analysis takes into account both harmful and beneficial effects of defendants’ conduct. For decades, what qualifies as “harmful” has been the subject of intense academic and judicial debate. But what counts as “beneficial”? Despite its fundamental importance to antitrust enforcement, this has remained a surprisingly open question. The relevant case law is a disorganized and sometimes incoherent tangle of competing approaches.

This article identifies the “market failure” approach as the doctrinally correct — and economically optimal — basis for procompetitive-justification analysis. Under this approach, restraints of trade may be justified if — but only if — they increase consumer surplus. With that in mind, this article establishes a novel taxonomy of market failures and corresponding procompetitive justifications. “Structural” justifications alleviate market failures that do not result from irrationality, whereas “behavioral” justifications correct irrational marketplace conduct. “Non-welfare” justifications, on the other hand, achieve moral or ethical ends not related to the economic concept of market failure.

These distinctions shed new light on antitrust case law and commentary. The concept of behavioral justifications, in particular, allows this article to contribute more insightful readings of multiple canonical Supreme Court decisions. On both doctrinal and consequentialist grounds, this article demonstrates that antitrust should continue to relax the rationality assumption so as to recognize behavioral justifications. Moreover, discretely analyzing non-welfare justifications reveals some surprising — and disturbing — examples of courts blessing restraints for reasons altogether foreign to antitrust law. The article concludes by identifying the proper rule-of-reason framework, a more rigorous test that will minimize error costs and maximize consumer welfare.

September 28, 2017 | Permalink | Comments (0)

THURSDAY, SEPTEMBER 28, 2017 - INAUGURAL NYSBA WILLIAM HOWARD TAFT LECTURE

INAUGURAL WILLIAM HOWARD TAFT LECTURE: "THE RULE OF REASON IN THE POST-ACTAVIS WORLD"

Thursday, September 28, 2017

The Penn Club of New York
30 West 44th Street
New York, New York
Main Dining Room

Breakfast - 9:30 a.m.
Lecture - 10:00 a.m
- 11:15 a.m.

Cost:
NYSBA Members: Free
Non-Members: $25

MCLE Credits
1.5 in Professional Practice (non-transitional)

REGISTER NOW

Moderator
William H. Rooney, Partner, Willkie Farr & Gallagher LLP

Presentation
Michael A. Carrier, Distinguished Professor, Rutgers Law School

Commentary
Saul P. Morgenstern, Partner, Arnold & Porter Kaye Scholer LLP

The lecture will address the rule of reason as applied to reverse payment ("pay-for-delay") settlement agreements since the Supreme Court's ruling in FTC v. Actavis in 2013.

View Program Flyer 

September 28, 2017 | Permalink | Comments (0)

The Apple E-Books Case: When is a Vertical Contract a Hub in a Hub-and-Spoke Conspiracy?

Benjamin Klein, University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon asks The Apple E-Books Case: When is a Vertical Contract a Hub in a Hub-and-Spoke Conspiracy?

ABSTRACT: Apple’s economic role in the Publisher conspiracy to increase Amazon’s below cost pricing of e-books is examined in a hub-and-spoke conspiracy framework. The Publishers conspired because of their concern that Amazon’s low prices would adversely affect physical book demand and prices and also create an Amazon retail monopoly under which Amazon would negotiate substantially lower wholesale e-book prices. The Publisher conspiracy successfully moved Amazon to an agency relationship and gained control over e-book retail pricing. This was accomplished with joint Publisher threats of Amazon to window (delay) the release of new e-book titles, which imposed a significant potential cost on Amazon in the face of Apple's scheduled entry with access to all new release titles without delay. It is demonstrated that Apple economically facilitated the Publisher conspiracy solely through its entry, not through any of its iBookstore contract terms. Specifically, contrary to the court, the MFN and maximum price terms in the Apple contracts had no effect on facilitating the Publisher conspiracy. In fact, if Apple had entered without these contract terms, e-book prices would have been substantially higher. Apple's contracts therefore should not have been evaluated under a per se standard.

September 28, 2017 | Permalink | Comments (0)

Wednesday, September 27, 2017

Filling Huawei's Gaps: The Recent German Case Law on Standard Essential Patents

Giuseppe Colangelo, LUISS Guido Carli, Department of Business and Management; University of Basilicata, Department of Mathematics, Computer Science and Economics; Stanford Law School and Valerio Torti, LUISS University of Rome are Filling Huawei's Gaps: The Recent German Case Law on Standard Essential Patents.

ABSTRACT: The Huawei ruling identified the steps that owners and users of SEPs will have to follow in negotiating a FRAND royalty. Compliance with the code of conduct will shield patent holders from the gaze of competition law and, at the same time, will protect implementers from the threat of an injunction.

The licensing framework provided by the CJEU is aimed at increasing legal certainty and predictability for the whole standardisation environment. Nevertheless, the judgment has been criticised because a relevant number of issues are left unresolved. In this scenario the activities of national courts in filling the gaps left by the CJEU deserve the utmost consideration. This paper will seek to explore the approach developed at national level post Huawei, focusing on the German judicial experience.

September 27, 2017 | Permalink | Comments (0)

The Rise of Market Power and the Macroeconomic Implications

Jan De Loecker and Jan Eeckhout identify The Rise of Market Power and the Macroeconomic Implications.

ABSTRACT: We document the evolution of markups based on firm-level data for the US economy since 1950. Initially, markups are stable, even slightly decreasing. In 1980, average markups start to rise from 18% above marginal cost to 67% now. There is no strong pattern across industries, though markups tend to be higher, across all sectors of the economy, in smaller firms and most of the increase is due to an increase within industry. We do see a notable change in the distribution of markups with the increase exclusively due to a sharp increase in high markup firms.

We then evaluate the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the last 3 decades: 1. decrease in labor share, 2. increase in capital share, 3. decrease in low skill wages, 4. decrease in labor force participation, 5. decrease in labor flows, 6. decrease in migration rates, 7. slowdown in aggregate output.

September 27, 2017 | Permalink | Comments (0)

Parallel Enforcement and Accountability: The Case of EU Competition Law

Kati Cseres, University of Amsterdam - Amsterdam Centre for European Law and Governance and Amsterdam Center for Law & Economics and Annalies Outhuijse, University of Groningen, Faculty of Law discuss Parallel Enforcement and Accountability: The Case of EU Competition Law.

ABSTRACT: EU competition law is enforced parallel by the EU Commission and 28 national competition authorities (NCAs) in a multi-level governance system composed of EU and national procedural laws. Regulation 1/2003 established the European Competition Network (ECN) in order to coordinate parallel proceedings between the Commission and the NCAs. This chapter analyses the shared enforcement of EU competition law from the perspective of political and judicial accountability. The chapter focuses on the accountability of the Commission, the NCAs and the ECN in their role of/as main actors of the shared enforcement. Two jurisdictions are used to illustrate the role and powers of the NCAs: the Netherlands and Hungary. After analysis of the powers and roles of the three respective actors (the Commission, the NCAs and the ECN) of parallel enforcement, section 3 examines judicial and political accountability and section 4 concludes.

September 27, 2017 | Permalink | Comments (0)

The Revolution of Information Economics: The Past and the Future

Joseph Stiglitz, Columbia University offers insights into The Revolution of Information Economics: The Past and the Future.

ABSTRACT: The economics of information has constituted a revolution in economics, providing explanations of phenomena that previously had been unexplained and upsetting longstanding presumptions, including that of market efficiency, with profound implications for economic policy. Information failures are associated with numerous other market failures, including incomplete risk markets, imperfect capital markets, and imperfections in competition, enhancing opportunities for rent seeking and exploitation. This paper puts into perspective nearly a half century of research, including recent advances in understanding the implications of imperfect information for financial market regulation, macro-stability, inequality, and public and corporate governance; and in recognizing the endogeneity of information imperfections. It explores the consequences of recent advances in technology and the policy challenges and opportunities they present for competition policy and policies regarding privacy and transparency. The paper notes the role that information economics played in stimulating other advances in economics, including contract theory and behavioral economics. It reinvigorated institutional economics, showing how institutions mattered, in some cases explaining institutional features that could not be well-understood in the conventional paradigm, and in others showing how institutional responses to market failures might or might not be welfare enhancing. The paper argues that the new paradigm provides a markedly different, and better, lens for looking at the economy than the older perfect markets competitive paradigm.

September 27, 2017 | Permalink | Comments (0)

The Legal Framework for SEP Disputes in EU Post-Huawei: Whither Harmonization?

Nicolo Zingales, University of Sussex Law School asks The Legal Framework for SEP Disputes in EU Post-Huawei: Whither Harmonization?

ABSTRACT: This article revisits the antitrust treatment of unilateral conduct in Standard Essential Patent (SEP) disputes in EU, with particular focus on the landmark CJEU judgment in Huawei v ZTE and the way it has affected subsequent developments before national courts. It illustrates that while the Court in Huawei significantly improved legal certainty both for SEP holders and their potential licensees, it also left open a number of crucial questions affecting everyday’s licensing practice. First, it is not entirely clear whether the liability of an SEP holder presupposes leveraging by a vertically integrated firm or can also arise in purely vertical or horizontal relationships. Secondly, the safe harbor procedure formulated in the judgment begs important questions concerning burden of proof and portfolio licensing, which have given rise to divergent interpretations. It follows that the space remains wide open for competing national and even regional approaches to the rights and obligations of SEP holders, calling for further European harmonization - be it judicially, legislatively, or administratively through the European Commission. In support for the latter measures, the article illustrates the limited remit of EU private international law rules in preventing the forum shopping which is likely to unfold as a result of a fragmented landscape for the resolution of SEP disputes.

September 27, 2017 | Permalink | Comments (0)

Tuesday, September 26, 2017

ABA Antitrust Section’s Legislation Committee is seeking up to three student volunteers to be policy monitors

The ABA Antitrust Section’s Legislation Committee is seeking up to three student volunteers who are interested in contributing to the Antitrust Section by monitoring states’ legislative developments relating to antitrust and consumer protection.  Each student will monitor legislative developments in two or three states and prepare blog posts on developments of interest to the antitrust community.  The blog posts are widely distributed to antitrust practitioners and FTC and DOJ officials.  Students may also be selected to contribute to the Committees’ annual newsletters.  This project is a great way to start gaining exposure within the antitrust community.  If interested, please contact aleksandr.livshits@friedfrank.com, and include a resume or a short bio. 

September 26, 2017 | Permalink | Comments (0)

Preemptive Mergers in a Vertically Differentiated Unionized Oligopoly

Borja Mesa‐Sánchez, Universidad Carlos III de Madrid analyzes Preemptive Mergers in a Vertically Differentiated Unionized Oligopoly.

ABSTRACT: In the context of an international unionized oligopoly with vertical differentiation, the pattern of mergers is investigated. We show that mergers between firms producing the same‐quality good lead wages to the reservation level, as well as maximize industry profits. However, it turns out that most of the market structure equilibria are shaped by mergers between producers of differentiated and homogeneous goods. This is so because mergers increase the market share of participating firms at the expense of that of the outsiders, leading to a scenario of preemptive mergers, where the main driving force can be to preempt rival mergers. Finally, it is shown that if three‐firm mergers are not allowed, the strategic behavior of firms is eliminated, mergers between same‐quality producers occur and social welfare is maximized.

September 26, 2017 | Permalink | Comments (0)

Public Benefits and Private Success: The Southwest Effect Revisited

Alan R Beckenstein, Darden Business School, University of Virginia and Brian M. Campbell, Campbell-Hill Aviation Group, LLC study Public Benefits and Private Success: The Southwest Effect Revisited.

Abstract: After Southwest Airlines was formed in 1967 and commercial operations began in 1971 the Company was engaged in 31 judicial and administrative proceedings through 1976 that challenged its right to operate. From its beginning the Company delivered a simple product with exceptional consumer value – low fares, high frequency of service, single aircraft type, simple product design, and a fun and friendly experience. 


Virtually every market entered by Southwest experienced a significant reduction in average market fares due to Southwest’s low fare initiatives, and passenger volumes responded disproportionately. The U.S. Department of Transportation’s landmark study in 1993 captioned this price-traffic stimulation phenomenon the SOUTHWEST EFFECT. Southwest began by serving three markets within the state of Texas and a fleet of four B737 airplanes. In July, 2017 it served 703 nonstop markets and 101 airports, using more than 700 B737 airplanes. 

This study reviews the framework for gauging the effect of entry (and potential entry) on markets for domestic air travel in the US. It provides an empirical survey of routes entered by Southwest from its beginning to the present. The presence and magnitude of the Southwest Effect has endured through time. Even today, when new markets have frequently been affected already by Southwest’s fares on connecting services, the Southwest Effect still shows, on average, an additional market fare reduction of 15% and corresponding traffic increase of 28% to 30%, from the introduction of nonstop service by Southwest. 

A few industry writers have questioned whether the Southwest Effect still exists today, or has it been overtaken by the fares/traffic effect created by other low cost carriers. The answer is clear. The Southwest Effect is alive and well. We find no evidence that the Southwest Effect has been eroded or overtaken in significance or magnitude by other airlines. This study set out to demonstrate in quantitative terms the Southwest Effect over the past four decades. Using regression analysis we developed a model to measure the current impact on market fares due to competition from Southwest. Our study finds that Southwest produces $9.1 billion annually in domestic consumer fare savings. One-way average market fares are $45 lower when Southwest serves a market nonstop than when it does not. If Southwest provides only connecting service in a city-pair market, average market fares are $17 lower (one-way) than when there is no competitive effect from Southwest.

September 26, 2017 | Permalink | Comments (0)