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Competition & Price Dispersion: Lessons from the Northeast Alliance
This paper explores the effects of the Northeast Alliance (NEA) between American Airlines and JetBlue Airways on airfares and the relationship between competition and price dispersion. Contrary to the existing literature, we find that the NEA increased airfares by 6.7% in NEA markets but significantly reduced airfares by 3.9% at LaGuardia Airport. While JetBlue's entry into NEA markets did not lower overall airfares, its entry reduced prices for lower-end products in markets where JetBlue had previously established services. Our finding suggests that softened competition makes it easier for firms to price discriminate.
JEL codes: L13, L40, L41, L93, D22, D40, D42, D43, K21, R41
Common Ownership and IPO’s: A Study of Competition
in the Airline Industry
Private firms engage in IPOs to raise capital, but can an IPO alter competitive incentives in an Oligopoly? In the common ownership literature, there is no evidence to indicate whether an IPO influences the competitive incentive of competitors. With itinerary data, I use a structural model of demand and supply in the US airline industry to estimate the change in internalisation of rival profits post-IPO. All else equal, I estimate an increase in the internalisation of competitor profits. This result extends the empirical literature on common ownership by providing estimates of a conduct parameter.
JEL codes: G34, L13, L93, D22, K21
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