Bankruptcy and Product-Market Competition: Evidence from the Airline Industry
University of Virginia - Department of Economics; Centre for Economic Policy Research (CEPR)
University of Virginia - McIntire School
April 1, 2012
International Journal of Industrial Organization, 30 (2012), pp. 564-577
We investigate the effects of Chapter 11 bankruptcy filings on product market competition using data from the US airline industry. We find: i) bankrupt airlines permanently downsize their national route structure, their airport-specific networks, and their route-specific flight frequency and capacity; ii) bankrupt airlines lower their route-specific prices while under bankruptcy protection, and increase them after emerging. We do not find robust evidence of significant changes by the bankrupt airline's competitors along any of the dimensions above.
Keywords: Airline Industry, Bankruptcy, Product Market Competition, Chapter 11
JEL Classification: G33, L13, L93, K2
Date posted: March 24, 2005 ; Last revised: October 26, 2012
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