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

65 Pages Posted: 25 Jul 2019 Last revised: 21 Oct 2019

See all articles by Patrick J. Dennis

Patrick J. Dennis

University of Virginia - McIntire School of Commerce

Kristopher Gerardi

Federal Reserve Bank of Atlanta

Carola Schenone

University of Virginia - McIntire School

Multiple version iconThere are 2 versions of this paper

Date Written: 2019-07-01

Abstract

Institutional investors often own significant equity in firms that compete in the same product market. These "common owners" may have an incentive to coordinate the actions of firms that would otherwise be competing rivals, leading to anti-competitive pricing. This paper uses data on airline ticket prices to test whether common owners induce anti-competitive pricing behavior. We find little evidence to support such a hypothesis, and show that the positive relationship between average ticket prices and a commonly used measure of common ownership previously documented in the literature is generated by the endogenous market share component, rather than the ownership component, of the measure.

Keywords: common ownership, airline prices, institutional ownership, competition

JEL Classification: G33, G34, G38, L11, L41

Suggested Citation

Dennis, Patrick J. and Gerardi, Kristopher S. and Schenone, Carola, Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry (2019-07-01). FRB Atlanta Working Paper No. 2019-15. Available at SSRN: https://ssrn.com/abstract=3423505 or http://dx.doi.org/10.29338/wp2019-15

Patrick J. Dennis (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

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

Kristopher S. 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

University of Virginia - McIntire School ( email )

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

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