How Do Information and Merger Affect Price Dispersion? Evidence from the U.S. Airline Industry

How Do Information and Merger Affect Price Dispersion? Evidence from the U.S. Airline Industry

Jiaying Wang

School of Economic Sciences, Washington State University, Pullman, United States

Yunsheng Ma

George Washington University - Department of Economics

Abstract

The aim of this study is to examine how increased market concentration and consumer information affect price dispersion in the US airline industry. Using data from three recent mergers in the US airline industry, the empirical results provide evidence that mergers and increased levels of consumer information are positively correlated with price dispersion in the Southwest Airlines-AirTran Airways merger. It indicates that consumer information can enhance the merger effect on price dispersion. These results have significant implications for antitrust policy in the context of e-commerce and internet-based industries.