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Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry

70 Pages Posted: 2 Nov 2017 Last revised: 15 Nov 2017

Patrick J. Dennis

University of Virginia - McIntire School of Commerce

Kristopher Gerardi

Federal Reserve Bank of Atlanta

Carola Schenone

University of Virginia - McIntire School

Date Written: November 1, 2017

Abstract

In many markets, institutional investors own significant equity stakes in multiple firms that compete in the same product market. A recent debate among legal and financial scholars has emerged as to whether competitors sharing ``common owners" are enticed to cooperate in the product market and engage in anti-competitive behavior, and this debate has the potential to generate legislation to curtail the number of firms in the same industry that an institutional investor can hold. This paper revisits the empirical evidence on the relationship between prices and common ownership in the airline industry documented in Azar et al. (2017). In contrast to their finding that greater common ownership leads to significantly higher average airline prices, our results suggest that there is no relationship between common ownership and prices in the airline industry.

Keywords: Common Owners, Competition, Airlines

JEL Classification: G30, G34, G32, G38

Suggested Citation

Dennis, Patrick J. and Gerardi, Kristopher and Schenone, Carola, Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry (November 1, 2017). Available at SSRN: https://ssrn.com/abstract=3063465

Patrick Dennis

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-4050 (Phone)

Kristopher Gerardi

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8561 (Phone)

HOME PAGE: http://sites.google.com/site/kristophergerardishomepage/

Carola Schenone (Contact Author)

University of Virginia - McIntire School ( email )

Rouss and Robertson Halls
125 Ruppel Drive
Charlottesville, VA 22903
United States
434-924-4184 (Phone)

HOME PAGE: http://sites.google.com/site/schenonecaro/

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