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Market Power, Efficiencies, and Entry - Evidence from an Airline Merger

35 Pages Posted: 23 Nov 2012  

Kai Hüschelrath

Centre for European Economic Research (ZEW)

Kathrin Mueller

Centre for European Economic Research (ZEW)

Date Written: 2012

Abstract

We investigate the competitive effects of the merger between Delta Air Lines and Northwest Airlines (2009) in the domestic U.S. airline industry. Applying fixed effects regression models we find that the transaction led to short term price increases of about 11 percent on overlapping routes and about 10 percent on routes which experienced a merger-induced switch of the operating carrier. Over a longer period, however, our analysis reveals that both merger efficiencies and post-merger entry by competitors initiated a downward trend in prices leaving consumers with a small net price increase of about 3 percent on the affected routes.

Keywords: Airline industry, merger, market power, efficiencies, entry-inducing effects

JEL Classification: L40, L93

Suggested Citation

Hüschelrath, Kai and Mueller, Kathrin, Market Power, Efficiencies, and Entry - Evidence from an Airline Merger (2012). ZEW - Centre for European Economic Research Discussion Paper No. 12-070. Available at SSRN: https://ssrn.com/abstract=2179034 or http://dx.doi.org/10.2139/ssrn.2179034

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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