Reference : Airline Alliances, Carve-Outs and Collusion
Scientific journals : Article
Business & economic sciences : Economic systems & public economics
Airline Alliances, Carve-Outs and Collusion
Brueckner, Jan [> >]
Picard, Pierre M. mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Review of Network Economics
CRA International P/L
Yes (verified by ORBilu)
[en] airline ; collusion ; competition policy
[en] In this paper, we ask how antitrust immunity subject to a carve-out affects collusion incentives in international airline alliances. We show that the gains from economies of density due to higher interline traffic under the alliance strengthen the incentive to collude on the interhub route, while the accompanying revenue gain heightens the incentive to defect from collusive behavior. These two effects exactly cancel in the case of linear demand and linear economies of density. Under this approximation, the incentives for interhub collusion are no different before and after the formation of an airline alliance subject to a carve-out.
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