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

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  • Zou, Li
  • Yu, Chunyan
  • Dresner, Martin

Abstract

This paper tests the mutual forbearance view in the context of airline alliances in the international air travel market. Using passenger booking and airfare data on transpacific routes, we find consistent evidence for the positive association between multimarket contact and airfares. Our results also suggest that multimarket contact between non-aligned airlines is associated with higher airfares, whereas multimarket contact between airlines in the same alliance has no additional upward impact on airfares. Moreover, it is shown that higher airfares tend to exist when airlines have greater multimarket contact on open-skies routes. In restrictive (non-liberal) international markets, however, multimarket contact may not affect airfare.

Suggested Citation

  • Zou, Li & Yu, Chunyan & Dresner, Martin, 2012. "Multimarket contact, alliance membership, and prices in international airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 555-565.
    • Handle: RePEc:eee:transe:v:48:y:2012:i:2:p:555-565
    DOI: 10.1016/j.tre.2011.09.001
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    5. Heiets, Iryna & La, Jiezhuoma & Zhou, Wenhui & Xu, Shaoxin & Wang, Xingyue & Xu, Yuchen, 2022. "Digital transformation of airline industry," Research in Transportation Economics, Elsevier, vol. 92(C).
    6. Gayle, Philip G. & Thomas, Tyson, 2016. "Assessing firm behavior in carve-out markets: Evidence on the impact of carve-out policy," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 178-194.
    7. Zhang, Yahua & Sampaio, Breno & Fu, Xiaowen & Huang, Zhibin, 2018. "Pricing dynamics between airline groups with dual-brand services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 46-59.
    8. Ma, Wenliang & Wang, Qiang & Yang, Hangjun & Zhang, Yahua, 2020. "Is multimarket contact an antitrust concern? A case of China’s airline market," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 515-526.
    9. Jules Yimga, 2023. "Multimarket Contact and Market Power Implications in the US Airline Industry," Networks and Spatial Economics, Springer, vol. 23(4), pages 985-1024, December.
    10. Coccorese, Paolo & Pellecchia, Alfonso, 2013. "Multimarket contact, competition and pricing in banking," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 187-214.
    11. Bock, Sebastian & Mantin, Benny & Niemeier, Hans-Martin & Forsyth, Peter John, 2020. "Bankruptcy in international vs domestic markets: Evidence from the airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 728-743.

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