Financial Condition and Product Market Cooperation
40 Pages Posted: 19 Mar 2011 Last revised: 23 Nov 2016
There are 2 versions of this paper
Financial Condition and Product Market Cooperation
Financial Condition and Product Market Cooperation
Date Written: July 2, 2014
Abstract
We provide evidence that existing studies relating financial condition to product market cooperation produce mixed results because of unique features of the industries examined. In particular, all evidence suggesting that poor financial condition decreases cooperation comes from the airline industry during periods of high idle capacity. Using a unique data set of aggregate airfare hikes and a more recent low-idle-capacity period, we find that poor financial condition is positively associated with product market cooperation. Although financially weak airlines appear to value the immediate cash flows of increased cooperation, only liquidity-constrained firms seem willing to incur the cost of cooperative attempts.
Keywords: Short-term Liquidity, Financial Distress, Tacit Collusion, Capacity Constraints, Airfare Price Hikes
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Efraim Benmelech, Tobias J. Moskowitz, ...
-
By Efraim Benmelech and Nittai Bergman
-
By Efraim Benmelech and Nittai Bergman
-
By Efraim Benmelech and Nittai Bergman
-
By Efraim Benmelech and Nittai Bergman
-
Bankruptcy and the Collateral Channel
By Efraim Benmelech and Nittai Bergman
-
The Collateral Channel: How Real Estate Shocks Affect Corporate Investment
By Thomas Chaney, David Alexandre Sraer, ...
-
The Collateral Channel: How Real Estate Shocks Affect Corporate Investment
By Thomas Chaney, David Alexandre Sraer, ...
-
Asset Liquidity and Financial Contracts: Evidence from Aircraft Leases