|
|
|
|
||||
|
||||
The Effect of Short-term Liquidity and Capacity Constraints on Tacit CollusionMatthew GustafsonUniversity of Rochester - William E. Simon Graduate School of Business Administration Ivan IvanovUniversity of Rochester - William E. Simon Graduate School of Business Administration John RitterUniversity of Rochester - William E. Simon Graduate School of Business Administration October 2012 Abstract: We provide empirical evidence on the peculiar dynamics by which firms in the airline industry perform aggregate price adjustments and argue why these fare hikes represent tacit collusion. After using weather instruments to account for endogeneity in our capacity measures, we find that negative changes (and low levels of) both short-term liquidity and idle capacity lead to increases in the probability of collusive actions. In addition, we find that these effects are complementary such that liquidity constraints cause firms to hike only when idle capacity is low, but have the opposite effect when idle capacity is high.
Number of Pages in PDF File: 40 Keywords: Short-Term Liquidity, Financial Distress, Tacit Collusion, Capacity Constraints, Airfare Price Hikes working papers seriesDate posted: May 13, 2011 ; Last revised: December 4, 2012Suggested CitationContact Information
|
|
||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo4 in 0.422 seconds
