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Review of Industrial Organization

, Volume 55, Issue 3, pp 339–374 | Cite as

Effect of Merger on Market Price and Product Quality: American and US Airways

  • Somnath DasEmail author
Article

Abstract

In this paper, I analyze the effect of the merger between American Airlines (AA) and US Airways (US) on market price and product quality. I use difference-in-differences analysis (DID) as the identification strategy. The DID analysis shows that the price has decreased and that the decrease in price is larger in bigger city-pair markets. Smaller city-pair markets have not benefited from reduction in price. Price has increased in the smaller markets due to the merger. Slot divestiture also has been helpful in reducing the price. The DID analysis also shows that the merger has no significant effect on the frequency of flights or on the number of seats. Delay in arrival and delay in departure have increased, while the merger has a significant effect in reducing the number of canceled flights.

Keywords

Merger Efficiency Market power Product quality 

JEL Classification

L1 L4 L9 

Notes

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Krannert School of ManagementPurdue UniversityWest LafayetteUSA

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