Does Competition Increase Quality? Evidence from the US Airline Industry

54 Pages Posted: 13 Jun 2015 Last revised: 17 Jan 2016

See all articles by Ricard Gil

Ricard Gil

Queen's University (Canada) - Smith School of Business

Myongjin Kim

University of Oklahoma - Department of Economics

Date Written: January 2016

Abstract

In this paper we study the impact of competition on the provision of quality in the US airline industry. Using changes in competition triggered by LCC entry and airline mergers, we find that an increase in competition increases the provision of quality of major incumbent and non-merging airlines by increasing the number of flights and seats available in a route as well as improving their on-time performance with less frequent cancellations and flight delays. Contrary to previous findings in the literature, our evidence suggests that an increase in competition unambiguously increases consumer surplus since prices go down and quality goes up.

Keywords: competition, airlines, quality, flight frequency, seat availability, on-time performance

JEL Classification: D22, D43, L11, L13, L93

Suggested Citation

Gil, Ricard and Kim, Myongjin, Does Competition Increase Quality? Evidence from the US Airline Industry (January 2016). Available at SSRN: https://ssrn.com/abstract=2617528 or http://dx.doi.org/10.2139/ssrn.2617528

Ricard Gil (Contact Author)

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Myongjin Kim

University of Oklahoma - Department of Economics ( email )

308 Cate Center Drive
Norman, OK 73019-2103
United States

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