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Analysis of prospective airline mergers using a simulated annealing model

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  • Martin, Shane L.

Abstract

This paper examines the efficacy of a simulated annealing model of the US airline network in analyzing potential mergers between major airlines. The simulation performs satisfactorily in modeling the current hub-and-spoke system focusing on the effects on passenger routings, producer profits, and consumer welfare. In general, the simulated annealing model reasonably demonstrates the price and demand effects due to a merger of major carriers. While it cannot take into account all relevant information, such as labor union relationships and negotiating tactics, it can offers insight into the implications of airline mergers.

Suggested Citation

  • Martin, Shane L., 2011. "Analysis of prospective airline mergers using a simulated annealing model," Journal of Air Transport Management, Elsevier, vol. 17(2), pages 80-87.
    • Handle: RePEc:eee:jaitra:v:17:y:2011:i:2:p:80-87
    DOI: 10.1016/j.jairtraman.2010.06.004
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    References listed on IDEAS

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    1. Severin Borenstein, 1992. "The Evolution of U.S. Airline Competition," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 45-73, Spring.
    2. Joseph I. Daniel & Munish Pahwa, 2005. "There and Back Again: Airline Routes, Fares and Passenger Flows in Network Equilibria," Working Papers 05-07, University of Delaware, Department of Economics.
    3. Daniel, Joseph I. & Harback, Katherine Thomas, 2009. "Pricing the major US hub airports," Journal of Urban Economics, Elsevier, vol. 66(1), pages 33-56, July.
    4. R. K. Lindner & F. G. Jarrett, 1978. "Supply Shifts and the Size of Research Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(1), pages 48-58.
    5. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
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    Cited by:

    1. Manuela, Wilfred S. & Rhoades, Dawna L. & Curtis, Tamilla, 2016. "The U.S. Airways Group: A post-merger analysis," Journal of Air Transport Management, Elsevier, vol. 56(PB), pages 138-150.
    2. Le Huubinh B. & Yimga Jules, 2019. "Market Power and Marginal Cost Effects in Competing Markets: Evidence from Airline Mergers," Review of Network Economics, De Gruyter, vol. 18(2), pages 63-108, June.

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