Multimarket Contact and On-Time Performance in the Us Airline Industry

Abstract:     
We examine the impact of multimarket contact on on-time performance in the airline industry. Using flight-level data for more than 3.5 million flights, we find that increases in multimarket contact lead to increases in delays, and this result is robust to several delay measures and the inclusion of carrier-route, as well as month, fixed effects. We further determine that the effect is primarily in the form of departure delays, and not due to changes in scheduled flight times or time spent in the air. These findings provide support for the mutual forbearance hypothesis, and suggest that multimarket contact facilitates tacit collusion not only on price - but also on quality.

Keywords: Airlines, Multimarket contact, Mutual forebearance, On-Time performance

JEL Classifications: L1, L13, L93

Working Paper Series