The Competitive Effects of Firm Exit - Evidence from the U.S. Airline Industry

46 Pages Posted: 16 Jun 2012  

Kai Hüschelrath

Centre for European Economic Research (ZEW)

Kathrin Mueller

Centre for European Economic Research (ZEW)

Date Written: 2012

Abstract

We study the competitive effects of five liquidations and six mergers in the domestic U.S. airline industry between 1995 and 2010. Applying fixed effects regression models we find that route exits due to liquidation lead to substantially larger price increases than merger-related exits. Within the merger category, our analysis reveals significant price increases on all affected routes immediately after the exit events. In the medium and long-run, however, realized merger efficiencies and entry-inducing effects are found to be strong enough to drive prices down to pre-exit levels.

Notes: Downloadable document is in German and English.

Keywords: Airline industry, exit, liquidation, merger, efficiencies, entry-inducing effects

JEL Classification: L40, L93

Suggested Citation

Hüschelrath, Kai and Mueller, Kathrin, The Competitive Effects of Firm Exit - Evidence from the U.S. Airline Industry (2012). ZEW - Centre for European Economic Research Discussion Paper No. 12-037. Available at SSRN: https://ssrn.com/abstract=2084716 or http://dx.doi.org/10.2139/ssrn.2084716

Kai Hüschelrath (Contact Author)

Centre for European Economic Research (ZEW)

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Kathrin Mueller

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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