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Mergers And Product Quality: A Silver Lining From De‐Hubbing In The U.S. Airline Industry

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  • Nicholas G. Rupp
  • Kerry M. Tan

Abstract

This paper investigates how de‐hubbing, which occurs when an airline ceases hub operations, impacts product quality. Examining four cases of de‐hubbing following U.S. airline mergers between 1998 and 2016, we analyze three product quality measures: on‐time performance, travel time, and flight cancellations. In order to isolate a merger's impact on product quality, we compare the results of four de‐hubbing events that followed a merger with three de‐hubbing cases that occurred independently of a merger. We find a silver lining from mergers because product quality improvements are isolated to de‐hubbing events which follow airline mergers rather than nonmerger‐induced de‐hubbing. (JEL L15, L93)

Suggested Citation

  • Nicholas G. Rupp & Kerry M. Tan, 2019. "Mergers And Product Quality: A Silver Lining From De‐Hubbing In The U.S. Airline Industry," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 652-672, October.
    • Handle: RePEc:bla:coecpo:v:37:y:2019:i:4:p:652-672
    DOI: 10.1111/coep.12419
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    References listed on IDEAS

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    Cited by:

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    2. Karanki, Fecri, 2024. "Cross-subsidization and U.S. airports," Transport Policy, Elsevier, vol. 145(C), pages 150-160.
    3. Bontemps, Christian & Remmy, Kevin & Wei, Jiangyu, 2021. "Ex-post evaluation of the American Airlines-US Airways merger: a structural approach," TSE Working Papers 21-1258, Toulouse School of Economics (TSE).
    4. Karanki, Fecri & Lim, Siew Hoon, 2020. "The effects of use agreements on airport efficiency," Journal of Air Transport Management, Elsevier, vol. 84(C).

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    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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