Reply to: 'Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry'

12 Pages Posted: 10 May 2018

See all articles by José Azar

José Azar

University of Navarra, IESE Business School; CEPR

Martin C. Schmalz

University of Oxford - Finance; CEPR; CESifo; European Corporate Governance Institute (ECGI)

Isabel Tecu

Charles River Associates (CRA)

Date Written: April 24, 2018

Abstract

Dennis, Gerardi, and Schenone (2017) (DGS) claim to replicate the data construction and results of Azar, Schmalz, and Tecu (forthcoming) (AST). While their implementation of the main specifications in AST generates qualitatively similar results, they claim that AST’s baseline results are driven 1) by the use of passenger volume as regression weights and 2) largely by the top fifth percentile of markets in the passenger count distribution.

In this note, we show that these claims are factually incorrect. First, because DGS do not in fact replicate the data construction described in AST, their paper is of limited usefulness in showing the effect of deviations from AST’s empirical specifications. Second, we show that AST's results are qualitatively robust to not weighting regressions. Third, AST's results also hold on subsamples excluding the top fifth percentile of markets by passenger count. Additional evidence we present in this note suggests that DGS's erroneous conclusions are driven by an incorrect treatment of ownership data as well as other differences in their sample's characteristics compared to AST's.

Keywords: Competition, Ownership, Diversification, Pricing, Antitrust, Governance, Product Market

JEL Classification: L41, L10, G34

Suggested Citation

Azar, José and Schmalz, Martin C. and Tecu, Isabel, Reply to: 'Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry' (April 24, 2018). Available at SSRN: https://ssrn.com/abstract=3168095 or http://dx.doi.org/10.2139/ssrn.3168095

José Azar

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

CEPR ( email )

London
United Kingdom

HOME PAGE: http://https://sites.google.com/site/joseazar/

Martin C. Schmalz (Contact Author)

University of Oxford - Finance ( email )

United States

CEPR ( email )

London
United Kingdom

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Isabel Tecu

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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