Abstract

http://ssrn.com/abstract=1775924
 
 

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Barriers to Entry in the Airline Industry: A Multi-Dimensional Regression-Discontinuity Analysis of AIR-21


Connan Andrew Snider


UCLA - Department of Economics

Jonathan W. Williams


University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

January 2014


Abstract:     
We investigate the success of legislation aimed at increasing competition at highly concentrated major US airports, mainly by forcing these airports to increase the availability of scarce airport facilities to new entrants. We use a multi-dimensional regression-discontinuity approach to exploit a sharp discontinuity in the law's implementation and identify its effects. We find a statistically and economically significant decrease in fares resulting from an airport's coverage, 13.4% (20.2%) in markets with one (both) endpoint(s) covered. Approximately half of the decline in fares is driven by the entry of low-cost carriers. With the exception of a small effect on on-time performance, we find little evidence that the fare declines were accompanied by a diminished quality of service. The magnitude of price declines relative to delay increases, along with the accompanying increases in passenger volumes, suggest the legislation was welfare improving. The results also suggest operating barriers to entry have been an important impediment to new low-cost competition.

Number of Pages in PDF File: 51

Keywords: Regression Discontinuity, Treatment Effect, Airline Industry, Barriers to Entry, Hub Premium, Airport Facilities

JEL Classification: C14, L50, L13, L93

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Date posted: March 6, 2011 ; Last revised: February 13, 2014

Suggested Citation

Snider, Connan Andrew and Williams, Jonathan W., Barriers to Entry in the Airline Industry: A Multi-Dimensional Regression-Discontinuity Analysis of AIR-21 (January 2014). Available at SSRN: http://ssrn.com/abstract=1775924 or http://dx.doi.org/10.2139/ssrn.1775924

Contact Information

Connan Andrew Snider
UCLA - Department of Economics ( email )
Box 951477
Los Angeles, CA 90095-1477
United States
Jonathan W. Williams (Contact Author)
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )
Athens, GA 30602-6254
United States
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