George Deltas

Presenter: George Deltas 

Paper: “Industry Associations and Pricing Co-ordination: IATA and Market Conduct on Transatlantic Routes," joint work with Richard Sicotte

Abstract: 

We examine whether IATA, one of the pre-eminent trade associations that set prices for trans-Atlantic air travel in the 20th century, acted as a coordinating agent on behalf of airlines to help them achieve monopoly profits. Using data from the 1956 to 1968 period, we find that for many years price elasticities at the observed passenger flows were inconsistent with monopoly pricing. This finding is robust to whether we use annualized data or whether we use seasonal variation in fares. However, monopoly pricing cannot be ruled out very early in this period, and neither can we rule out that IATA prices exceeded those set by a non-cooperative oligopoly until at least the early 1960s. More competitive pricing towards the end of the period, that was noticeably more aggressive than that of the Cournot equilibrium, may reflect concerns about large scale entry of non-IATA charter companies. Our paper speaks to the broader question of whether industry associations can have anti-competitive effects. It also demonstrates that bounding techniques can provide useful information on firm conduct with very limited data.