Public Communication and Collusion in the Airline Industry
58 Pages Posted: 16 Feb 2018 Last revised: 26 Sep 2018
Date Written: September 19, 2018
We investigate whether legacy U.S. airlines communicated via earnings calls to coordinate with other legacy airlines in oﬀering fewer seats on competitive routes. Using text analytics, we build a novel dataset on communication. Our estimates show that when all legacy airlines in a market discuss the concept of “capacity discipline,” they reduce oﬀered seats by between 1.13% to 1.45%. We verify that this reduction materializes when airlines communicate concurrently, and that it cannot be explained by the possibility that airlines are simply following through with their announcements. Additional evidence from conditional-exogeneity tests and control function estimates conﬁrms our interpretation.
Keywords: Airlines, Communication, Collusion, Capacity Discipline, Text Data
JEL Classification: D22, L13, L41, L93
Suggested Citation: Suggested Citation