Multimarket contact, alliance membership, and prices in international airline markets

Zou, Li; Yu, Chunyan; Dresner, Martin

doi:10.1016/j.tre.2011.09.001

Cited by 22 publications

(10 citation statements)

References 22 publications

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“…A well established literature that may have implications for the issues examined in this paper is the literature that posits the idea of mutual forbearance [Bernheim and Whinston (1990); Evans and Kessides (1994); Baum and Korn (1996); Gimeno (1999); Gimeno and Woo (1999); Bilotkach (2011);Zou, Yu and Dresner (2012); Ciliberto and Williams (2014)]. In the field of industrial organization the concept of mutual forbearance posits that a firm will be inclined not to compete aggressively in a given market for fear of retaliation in other markets where it competes with the same firms.…”

Section: Resultsmentioning

confidence: 99%

Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy

Gayle

Thomas

2016

Journal of Economic Behavior & Organization

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Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). While cooperation may yield benefits, it can also have anti-competitive effects in markets where partners competed prior to receiving ATI. A carve-out policy forbids ATI partners from cooperating in markets policymakers believe will be most harmed by anti-competitive effects. We examine carve-out policy applications to three ATI partner pairings, and find evidence more consistent with cooperative pricing in carveout markets in spite of the policy, calling into question the effectiveness of the policy in achieving intended market outcomes.

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Section: Resultsmentioning

confidence: 99%

Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy

Gayle

Thomas

2016

Journal of Economic Behavior & Organization

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“…Several empirical articles have applied the theory from Feinberg (1984) and Bernheim and Whinston (1990) to the airline industry. Evans and Kessides (1994) finds that average one-way airfares are higher in city-pair markets served by carriers with extensive multimarket contact, whereas Zou et al (2012) find that airline alliances mitigate the positive relationship between multimarket contact and airfares for transpacific routes. Instead, they find that higher airfares exist when airlines have greater multimarket contact on open-skies routes.…”

Section: Literature Reviewmentioning

confidence: 98%

Tacit collusion and price dispersion in the presence of Southwest Airlines

Kim

Tan

2021

Southern Economic Journal

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We study the impact of tacit collusion on price dispersion in the U.S. airline industry. We find that tacit collusion driven by multimarket contact has a positive effect on prices, but a negative effect on price dispersion. Our empirical results suggest that airfares throughout the price distribution increases, yet the price distribution becomes more compressed since 10th percentile airfares increase by a larger amount than 90th percentile airfares. Moreover, we also find that this pricing phenomenon does not exist if Southwest Airlines is present on the route. Thus, route-level price competition is softened when the same airlines directly compete more frequently, except when Southwest Airlines services that route. As such, our empirical analysis provides evidence that the presence of Southwest Airlines exhibits an anti-collusive effect.

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“…Passenger traffic is available to those airlines that aim to introduce new routes and networks with efficient infrastructure, quality, and service standards. Selected areas and developments that remain critical to the airline industry are age of planes, business models, large‐scale hubs, economies of scale, pricing, service issues, and alliances (see Corridore, ; d'Huart & Belobaba, ; Garrow, Hotle, & Mumbower, ; IATA, , ; Kasarda & Lindsay, ; Peneda, Reis, & Macário, ; Zou, Yu, & Dresner, ). We now discuss and elaborate these issues and forthcoming trends and changes.…”

Section: What Lies Ahead? Trends and Developmentsmentioning

confidence: 99%

Super‐Connectors: A New Model of Internationalization from the MENA Region

Anwar

2015

Thunderbird Intl Bus Rev

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The main purpose of this case‐based research is to investigate and analyze three fast‐growing airlines (Emirates/Dubai, Qatar Airways/Qatar, and Etihad Airways/Abu Dhabi) and their internationalization from the Middle East and North Africa (MENA) region. The three carriers that are commonly known as “super‐connectors” in the airline industry continue to excel in their business models and internationalization. Based on secondary data, surveys, and company‐specific information, the article uses a longitudinal case‐based research approach to discuss the three airlines. Findings of the work reveal that the three super‐connectors have aggressively expanded in the MENA region and beyond by seeking multiple alliances, joint ventures, long‐term collaborative agreements (code sharing), and foreign direct investment (FDI). These activities represent innovative business models and operational efficiencies in the global airline industry. We believe that non‐MENA airlines may not have the same dynamism, strategic clout, corporate‐related efficiencies, and financial prowess that we witness among the three super‐connectors. In international business (IB) and multinational corporation (MNC)‐related areas, researchers, industry analysts, and policymakers need to pay attention to the MENA region's super‐connectors and their emerging internationalization models. The article also provides useful trends and implications that can be benchmarked by practitioners, researchers, and airlines regarding the issues of internationalization, growth, and new business models. © 2015 Wiley Periodicals, Inc.

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Multimarket contact, alliance membership, and prices in international airline markets

Cited by 22 publications

References 22 publications

Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy

Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy

Tacit collusion and price dispersion in the presence of Southwest Airlines

Super‐Connectors: A New Model of Internationalization from the MENA Region

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