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Supramonopoly: Theory and Evidence from the US Air Passenger Service Markets

Author

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  • Jin Luo
  • Li Way Lee

Abstract

A supramonopoly is the market structure of a homogeneous good that is priced higher than the monopoly level. We present evidence of supramonopoly in the US air passenger service. For four airline mergers during the period of 1993 to 2009, we identify routes that dropped fares for no other reason than the increase in market power due to merger. Therefore each of those routes had fare higher than the monopoly level before the merger to monopoly. We explain supramonopoly as the result of a cartel with strongly punitive matching rules. We also discuss the striking implications for antitrust and regulatory policies.

Suggested Citation

  • Jin Luo & Li Way Lee, 2010. "Supramonopoly: Theory and Evidence from the US Air Passenger Service Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(3), pages 405-426.
    • Handle: RePEc:taf:ijecbs:v:17:y:2010:i:3:p:405-426
    DOI: 10.1080/13571516.2010.513817
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    Cited by:

    1. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming & Zhang, Yahua, 2020. "Impact of high-speed rail on market concentration and Lerner index in China's airline market," Journal of Air Transport Management, Elsevier, vol. 83(C).
    2. Zhang, Qiong & Yang, Hangjun & Wang, Qiang & Zhang, Anming, 2014. "Market power and its determinants in the Chinese airline industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 64(C), pages 1-13.

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