Examining the Coordinated Effects of the AA/USAir Merger

36 Pages Posted: 2 Jul 2021 Last revised: 26 Feb 2024

See all articles by Soo Jin Kim

Soo Jin Kim

Government of Canada - Bank of Canada

Yongjoon Park

University of Massachusetts Amherst

Date Written: January 24, 2024

Abstract

We examine the impact of mergers involving maverick firms on pricing, specifically focusing on the American and US Airways merger. We document substantial increases in connecting flight prices offered by nonmerging carriers on routes where US Airways previously held a dominant position. This surge occurred after the merger eliminated Advantage Fares, a price discounting program from US Airways. These pricing patterns may be attributed to the coordinated effects of the merger, as we eliminate several alternative explanations. Our theoretical analysis demonstrates that changes in the cost structure induced by the merger can explain the incentive for collusion among nonmerging carriers.

Keywords: Airline Mergers, Merger Analysis, Coordinated Effects

JEL Classification: L93, L41, L44

Suggested Citation

Kim, Soo Jin and Park, Yongjoon, Examining the Coordinated Effects of the AA/USAir Merger (January 24, 2024). Available at SSRN: https://ssrn.com/abstract=3877895 or http://dx.doi.org/10.2139/ssrn.3877895

Soo Jin Kim (Contact Author)

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Yongjoon Park

University of Massachusetts Amherst ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003
United States

HOME PAGE: http://https://www.yongjoonpark.com

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