Thursday, August 5, 2021

Merger with a Maverick Firm: Examining the Coordinated Effects of the AA/USAir Merger

Merger with a Maverick Firm: Examining the Coordinated Effects of the AA/USAir Merger

 

 

Soo Jin Kim

ShanghaiTech University - School of Entrepreneurship and Management

Yongjoon Park

University of Massachusetts Amherst; University of Maryland

Date Written: June 30, 2021

Abstract

This paper studies the coordinated effects of the merger between American Airlines and US
Airways by examining the extent to which the connecting prices of the nonmerging legacy carriers
(Delta and United) evolved when the merger eliminated Advantage Fares, a connecting flight price
discounting program offered by US Airways. In our empirical analysis, we find that postmerger
nonmerging legacy carriers substantially increased their connecting flight prices on routes where US Airways had a dominant position, and a similar pattern can be found for the merging carriers on
routes where nonmerging legacy carriers had a dominant position. We next conduct a theoretical
analysis in which we show that these empirical findings can be explained by the elimination of
maverick firms and how such elimination facilitates coordinated conduct among legacy carriers.
Finally, we note the potential importance of connecting services in merger analysis in the airline
industry.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/08/merger-with-a-maverick-firm-examining-the-coordinated-effects-of-the-aausair-merger.html

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