IDEAS home Printed from https://ideas.repec.org/a/bpj/rneart/v20y2021i4p213-230n2.html
   My bibliography  Save this article

Multimarket Contact and Profitability Implications for US Airlines

Author

Listed:
  • Yimga Jules

    (School of Business, Embry-Riddle Aeronautical University, 3100 Willow Creek Road, Prescott, AZ 86301, USA)

Abstract

Routine industrial analyses use internal market characteristics such as market shares to proxy for market power. However, recent studies argue that factors that are external to the market such as contact across multiple markets can be linked to tacit collusion. Using a structural demand and supply model for air travel, we quantify the variable profit effects of multimarket contact. We find that multimarket contact results in increases in variable profits ranging between $15,000 and $20,000 per contact in a quarter. Extrapolating this estimate across all contacts proves to be quite sizeable. These positive responses in profitability are especially stronger in less competitive markets. Our results, taken together, lend support to the mutual forbearance hypothesis.

Suggested Citation

  • Yimga Jules, 2021. "Multimarket Contact and Profitability Implications for US Airlines," Review of Network Economics, De Gruyter, vol. 20(4), pages 213-230, December.
    • Handle: RePEc:bpj:rneart:v:20:y:2021:i:4:p:213-230:n:2
    DOI: 10.1515/rne-2022-0031
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/rne-2022-0031
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/rne-2022-0031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rneart:v:20:y:2021:i:4:p:213-230:n:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.