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The effects of airline alliances: What do the aggregate data say?

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  • Marín, Pedro L.

Abstract

We consider an empirical model of worldwide airline alliances that we apply to a large set of companies for the period 1995-2000. Using observations at the companies level, we estimate a cost, capacity, and demand system that accounts for cross-price elasticities. From the estimates, we shed light on the fact that many airlines involved in the same alliances are potential substitutes. We also test for the effects of alliances on airlines’ fares and suggest that airlines inside alliances cut prices by 5% on average compared to airlines outside alliances. Finally, we construct price-cost margins for each airlines and suggest that current pricing habits are not uniform and vary from one alliance to another.

Suggested Citation

  • Marín, Pedro L., 2009. "The effects of airline alliances: What do the aggregate data say?," UC3M Working papers. Economics we096540, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we096540
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    1. Gagnepain, Philippe & Marin, Pedro L, 2006. "Regulation and Incentives in European Aviation," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 229-248, April.
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    Cited by:

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    2. Zou, Li & Chen, Xueqian, 2017. "The effect of code-sharing alliances on airline profitability," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 50-57.

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    More about this item

    Keywords

    alliances;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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