Christian Bontemps (Lunch Seminar Economics) | Dipartimento di Scienze Economiche

Christian Bontemps (Lunch Seminar Economics)

21 ottobre 2021 12:30 - 13:30
Caniana - Room TBD
Christian Bontemps, Toulouse School of Economics
Seminari di dipartimento
Persona di riferimento: 
Davide Scotti,
Strutture interne organizzatrici: 
Dipartimento di Scienze Economiche

Lunch Seminar Economics (LSE) - 2021/2022

Interviene: Christian Bontemps, Toulouse School of Economics

Title: Price Competition and Endogenous Product Choice in Networks: Evidence from the US Airline Industry

Authors: C. Bontemps, Cristina Gualdani, K. Remmy

Abstract: The recent merger waives in airline markets have received attention by researchers and the general public alike. Most academic studies have analysed the problem using demand/supply or entry models. These contributions assume that airlines’ route networks are exogenous, or that airlines’ entry decisions are i.i.d. across routes. Instead, we estimate a two-stage model where airlines choose their route networks in the first stage and compete in prices in the second stage. The two-stage framework allows us to account for selection of airlines into interdependent routes. Moreover, it permits us to make counterfactual exercises which robustly predict changes not only in prices and markups, but also in how airlines adjust their route networks. We estimate the model using crosssectional data on the US airline market and use our results to evaluate a merger between American Airlines and US Airways. We find that after the merger consumer surplus rises by around 7% and that remedies imposed to the merging parties by the Department of Justice at Charlotte Airport were effective in preventing harm to consumers.