The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business

WZB, Markets and Political Economy Working Paper No. SP II 2005-06

47 Pages Posted: 15 May 2005

See all articles by Joseph A. Clougherty

Joseph A. Clougherty

University of Illinois at Urbana-Champaign

Date Written: April 2005

Abstract

The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization (IO) literature; yet, that literature neglected non-US domestic mergers and potential for international competitive gains. Using an International Business perspective to complement an IO analysis, I argue that factoring international competitive incentives helps explain domestic airline merger activity. A Cournot model of airline competition illustrates that domestic mergers, via enhanced domestic networks and reduced domestic competition, generate international competitive gains. Further, empirical tests - using a structural-equations approach on panel data covering international city-pair market segments - support domestic mergers improving international competitiveness.

Keywords: Airline mergers, imperfect competition, international determinants

JEL Classification: L13, F14, L93

Suggested Citation

Clougherty, Joseph A., The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business (April 2005). WZB, Markets and Political Economy Working Paper No. SP II 2005-06, Available at SSRN: https://ssrn.com/abstract=721466 or http://dx.doi.org/10.2139/ssrn.721466

Joseph A. Clougherty (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 S. Sixth Street
330 Wohlers Hall, MC-706
Champaign, IL 61820
United States

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