Market Structure and Competition in Airline Markets · Price ($) 243.21 54.20 139.5 385.5 20,470...

Market Structure and Competition in Airline Markets

Federico Ciliberto (UVA) Charlie Murry (Penn State) Elie Tamer (Harvard)

November 3-4 2016 FTC Micro Conference 2016

Ciliberto Murry and Tamer Mkt Structure and Competition 1 24

Introduction

bull We expect firms to strategically self-select themselves into markets based on observable and unobservable characteristics

bull Firms who are present in markets may match better with those markets than firms who are not present analagous to the labor literature where we expect workers who accept wage offers to differ than the population of potential workers

bull After a merger or other change in environment we expect firms to adjust intensive margins (quantity prices etc) as well as entry or product mix decisions

bull However canonical models of demand and supply rely on the assumption that the set of products observed is ldquoexogenousrdquo

bull Two potential problems bull Biased estimates demand elas marginal costs market power bull What to do with set of products for counterfactuals


Introduction

bull Practically there is a tension between the canonical static ldquooutcomerdquo models (demandsupply models of Berry 1994 BLP) and the canonical selection models (Bresnahan and Reiss multiple Berry 1992)

bull Demand models of product differentiation have rich heterogeneity to capture markups and costs

bull Adding rich heterogeneity creates problems in entry models (multiplicity of equilibrium)


What our paper is about

bull Propose methodology to estimate simultaneous static complete information games where economic agents make a discrete participation decision and conditional on participation make a continuous decision and receive a payoff

bull Develop a multi-agent version of the classic selection model (Gronau 1974 and Heckman 19761979)

bull Use the insights of Tamer (2003) and Ciliberto and Tamer (2009) to deal with multiple equilibria

bull We use the methodology to study airline firms that strategically decide whether to enter into a market and the prices they charge if they enter

bull Simulate how prices and market structure change after a hypothetical merger between USAir and American


The Econometric Problem

bull Workhorse model of demandsupply Berry (1994) etc make use of some form of a distributional assumption on unobserved product quality and marginal costs ξ ω to identify model

E[ξ|Z] = E[ω|Z] = 0

bull Where utility has some form like uijt = Xjtβ minus αpjt + ξjt + Eijt

bull Consider firm entry decision yjt = 1 if enter and yjt = 0 if not entered If firms face a meaningful selection problem (non-zeros fixedsunk costs)

E[ξ|Z y = 1] = 0 =f rArr E[ξ|Z] = 0

bull Using above distributional assumption will give biased results ndash high value ξ firms should be more likely to enter

bull More generally there may be correlation between unobserved demand marginal costs and entry costs that contribute selection


Entry and Competition in the Literature

Eizenberg (2014) ndash selection on observables

bull Uses insights of Pakes Porter Ho Ishii (2015) to estimate a model where PC manufacturers decide which computers to offer then compete in prices

bull One assumption needed to identify model is that during the ldquoentryrdquo stage firms do not know ξ only its distribution

bull This may be appropriate in some contexts but inappropriate in others

Mergers Prices and EntryExit bull Gandhi et al (2008) and Seim Mazzeo and Varela (wp) both use

simulated data to understand how prices are affected by product entry and repositioning after a merger

bull Li Mazur Sweeting and Roberts (wp) estimate similar model to ours without mult eq and correlations between unobservables


Findings

Using 2012 DB1B Department of Transportation airline data

bull Price-cost markups about 30 higher than a model with no selection

bull Correlation between unobservables is important for selection

bull Simulate USAir-American merger bull Merged firm has strong incentive to enter new markets

bull Post-merger entry mitigates price increases from merger

bull Merged firm faces stronger entry threat from legacy carriers as opposedto low cost carriers

bull During actual merger DOJ focused on protecting LCCs market access


Model and Estimation


Model bull Firms simultaneously decide to enter market and conditional on entry

simultaneously set prices bull Demand Nested Logit insideoutside nesting structure

uijm = Xjmβ + αpjm + ξjm + vigm + (1 minus σ)Eijm

=rArr ln(sjt) minus ln(sj0) = Xjmβ + αpjm + σln(sj|g) + ξjm (1)

bull Supply constant marginal cost Nash Bertrand (Berry 1994)

1 minus σ log(mcjm) = log(p + ) = φWjm + ηjm (2)

α(1 minus σsj|g minus (1 minus σ)sj )

bull Entry equation

yjm = 1 lArrrArr (pjm minus mcjm)Mmsjm minus [γZjm + νjm] ge 0 (3) V arP rofits F ixedCosts

bull We have 3 times J equations Ciliberto Murry and Tamer Mkt Structure and Competition 9 24

Estimation ndash General Framework

bull A multi-agent version of the classic Heckman Selection problem

bull Two concerns 1 Multiple equilibrium in the entry equation

2 The ldquooutcomerdquo equation has an additional endogenous process pricing decision

bull Because of multiple equilibrium the selection equation is incomplete

bull The model can only generate an upper and lower bounds for the cumulative distribution of selected demand errors

bull For example no hope of constructing a correction using a well defined inverse Mills ratio



bull Given a guess of the parameters (β0 α0 σ0 φ0 γ0) the data identifies the distribution of ldquoselectedrdquo residuals

Pr(sjt minus sj0 minus (Xjmβ0 + α0 pjm + σ0ln(sj|g )) lt t|X Z W y)

= Pr(ξjm ˆ lt t|X Z W y) (4)

bull We can then fully solve the model given (β0 α0 σ0 φ0 γ0) by simulating the unselected distribution of demand marg cost and fixed cost errors and recovering the model predicted distribution of selected errors ξlowast

bull There is multiple equilibrium in the entry equation so we construct an lower and upper bound for the distribution of selected errors predicted by the model

PrL(ξlowast lt t) P rL(ξlowast lt t) (5)


Estimation ndash Moment Conditionsbull Construct moments using the following inequality

PrL(ξlowast lt t | Q) le Pr(ξ lt t | Q) le PrU (ξlowast lt t | Q)

bull where Q = (XZW ) are exogenous shifters from the 3times J equationsProbability

1

Upper13 Bound13 H2 Lower13 Bound13 H1

v13 13

The13 CDF13 of13 the13 residuals13 is13 above The13 CDF13 of13 the13 residuals13 is13 belowthe13 upper13 bound13 so13 we13 take13 the the13 lower13 bound13 so13 we13 take13 thedifference13 of13 the13 two13 PDFs13 to13 difference13 of13 the13 two13 CDFs13 to13 construct13 the13 distance13 function construct13 the13 distance13 function

ξ

)( ξ

P


Empirical Setting

bull Domestic commercial airline industry

bull Unit of observation airline-market from DOTrsquos DB1B and T-100 datasets in 2012

bull Market unidirectional trip between two airports (6322 markets including 172 not served by any airline)

bull Six airlines American (AA) Delta (DL) United (UN) US Air (US) Southwest (WN) and a composite Other Low Cost Carrier (LCC)

bull Number of potential entrants varies across markets based on existing flights at endpoints


Descriptive Statistics ndash Entry

Table Percent of Markets Served

Entry Potential AA 048 090 DL 083 099 LCC 026 078 UA 066 099 US 064 095 WN 035 038

Table Distribution of Number of Entrants

1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables

bull Market distance ndash demand and MC

bull Demand Nonstop Origin ndash captures affect of FFP

bull MC Origin Presence ndash captures the opportunity cost of using those seats on another route

bull Entry Nonstop Dest ndash captures economies of density in using gates and gate staff to run multiple routes


Descriptive Statistics

Table Summary Statistics

Mean Std Dev Min Max N Equation

Price ($) 24321 5420 1395 3855 20470 Entry Utility MC

All Markets

Origin Presence () 044 027 0 1 37932 MC Nonstop Origin 642 1237 0 127 37932 Entry Utility Nonstop Dest 657 1271 0 127 37932 Entry Distance (000) 111 063 015 272 37932 Utility MC

Markets Served

Origin Presence () 058 019 000 1 20470 MC Nonstop Origin 850 1475 1 127 20470 Entry Utility Nonstop Destin 853 1470 1 127 20470 Entry Distance (000) 121 062 015 272 20472 Utility MC


Parameter Estimates Table Parameter Estimates Exogenous vs Endogenous Market Structure

Exog Mkt Structure Endog Mkt Structure

Demand Point Est (se) CHT CI Constant -2863 (0225) [-5499 -5467] Distance 0319 (0015) [ 0184 0191] Nonstop Origin 0180 (0008) [ 0125 0130] LCC -0980 (0053) [-0345 -0333] WN 0416 (0038) [ 0222 0230] Price(α) -0025 (0001) [-0012 -0011] σ 0080 (0017) [ 0481 0499]

Marginal Cost Constant 5338 (0003) [ 5173 5221] Distance 0064 (0002) [ 0030 0031] Origin Presence -0041 (0003) [-0242 -0233] Cons LCC -0127 (0007) [-0132 -0127] Cons WN -0282 (0008) [-0088 -0085]

Fixed Cost Constant ndash [ 7768 8066] Nonstop Origin ndash [-0142 -0137] Nonstop Dest ndash [-0333 -0321] LCC ndash [-0003 -0003] WN ndash [-1642 -1583]

Median Elas of Demand -5567 [-243-240] Median Markup 38167 [51255340]


Takeaways from Estimation Results

bull Selection model price parameter elasticity is half the size of exogenous model

bull Story Firms who enter are ldquobetterrdquo (unobservables) and therefore can exert more market power

bull Airline heterogeneity important in both demand and costs


Merger


Merger Simulation

bull Simulate merger between American and USAir (our data is pre-merger)

bull Consider a ldquobest caserdquo scenario for the new AAUS merged firm

bull Details bull Eliminate US as a potential firm bull In each market assign AA the ldquobestrdquo observable and unobservable

characteristics between the pre-merged AA and US bull Implies AA will have weakly lower costs and weakly higher utility after

the merger


Economics of Merger with Endogenous Entry

More Concentration (markets with US and AA pre-merger)

bull Less competition =rArr higher prices [EX] bull New firm enters market ndash prices

AAUS lower marginal costs

bull Lower prices [EX] bull Rivals might exit bc fiercer price competition bull AAUS might enter new markets

AAUS lower fixed costs

bull Entry into new markets could replace incumbents

AAUS higher consumer utility

bull AAUS can raise price[EX] bull AAUS enters new markets because charge higher prices and cover FC bull AAUS steal consumers from rivals ndash rivals exit


Post Merger EntryExit in Concentrated Markets bull AA enters unserved markets Also high likelihood of monopolization

bull Many markets that DL is potential entrant Now enters as duopoly Table Market Structures in AA and US Monopoly and Duopoly Markets

Post-merger

Pre-merger No Firms AA Monopoly

No Firms [036090] [010019] AA amp US Duopoly [000001] [020082]

Table Entry of Competitors in AA and US Duopoly Markets

Post-merger market structure

Pre-merger Duopoly AAUS amp DL Duopoly AAUS amp LCC Duopoly AAUS amp UA Duopoly AAUS amp WN

Duopoly AA amp US [008025] [001002] [005011] [000001]

Table AAUS Price Changes in Duopoly Markets


Change in the price of AA Duopoly AAUS amp DL Duopoly AAUS amp LCC Duopoly AAUS amp UA Duopoly AAUS amp WN

Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]


Markets Involving DCA

bull DCA was an airport with a high presence by AA and US

bull Type of market that is particularly concerning for regulators

bull The DOJ approved the merger conditional on AA giving up slots to other competitors

Table Post-merger entry and pricing in pre-merger AA amp US Duopoly markets Reagan National Airport

Prob mkt structure Monopoly AAUS Duopoly AAUS amp DL Duopoly AAUS amp LCC Duopoly AAUS amp UA Duopoly AAUS amp WN

Mkt Struct Transitions [0161 0710] [ 0136 0227] [0000 0047] [0059 0188] [0000 0000] Change in Prices [0019 0089] [-0095 0018] [-0073 0126] [-0114 0068] [na]


Conclusions

bull Estimated a model of supplydemand with endogenous entry

bull Market power estimates differ substantially from exogenous market structure estimates

bull Potential upside of merger due to entry

bull Many possible changes to market structure and prices


LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]

Market Structure and Price Transitions Table Post-merger Entry of AA in New Markets

(1) (2) (3) (4) (5) Monopoly Duopoly 3-opoly 4-opoly

Pre-merger AA AA Pre-merger AA Pre-merger AA Pre-merger AA Firms Replacement Entry Firms Entry Firms Entry Firms Entry

DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]

DLLCC [009027] DLUA [024032] DLWN [016027] LCCUA [005022] LCCWN [004023] UAWN [011026]

DLLCCUA [021035] DLLCCUAWN [027044] DLLCCWN [010033] DLUAWN [029037] LCCUAWN [007029]

Table Post-Merger Price Changes After the Entry of AA in New Markets

Monopoly Duopoly 3-opoly 4-opoly

Pre-merger Firms ΔPrice




DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]

Ciliberto Murry and Tamer

LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]

WN [-00090001]Mkt Structure and Competition 1 2

Transitions with Exit Table Likelihood of Exit by Competitors after AA-US Merger

Duopoly with AA 3-opoly with AA

Pre-merger Pre-merger Firm Exit Firms Exit

DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN

Table Price Changes From Exit of Competitor After Merger

Duopoly 3-opoly

Pre-merger AA Pre-merger Pre-merger Firm ΔPrice Firm ΔPrice Firm ΔPrice

DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Introduction

bull We expect firms to strategically self-select themselves into markets based on observable and unobservable characteristics

bull Firms who are present in markets may match better with those markets than firms who are not present analagous to the labor literature where we expect workers who accept wage offers to differ than the population of potential workers

bull After a merger or other change in environment we expect firms to adjust intensive margins (quantity prices etc) as well as entry or product mix decisions

bull However canonical models of demand and supply rely on the assumption that the set of products observed is ldquoexogenousrdquo

bull Two potential problems bull Biased estimates demand elas marginal costs market power bull What to do with set of products for counterfactuals


Introduction














E[ξ|Z] = E[ω|Z] = 0



E[ξ|Z y = 1] = 0 =f rArr E[ξ|Z] = 0













Findings


















bull Entry equation






















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Introduction














E[ξ|Z] = E[ω|Z] = 0



E[ξ|Z y = 1] = 0 =f rArr E[ξ|Z] = 0













Findings


















bull Entry equation






















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix










E[ξ|Z] = E[ω|Z] = 0



E[ξ|Z y = 1] = 0 =f rArr E[ξ|Z] = 0













Findings


















bull Entry equation






















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix










Findings


















bull Entry equation






















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix










bull Entry equation






















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix




















1


v13 13


ξ

)( ξ

P


Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Empirical Setting











1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix





1 2 3 4 5 6

Fraction 008 111 516 1811 4287 3268


Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Variables










All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix





All Markets


Markets Served















Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix













Merger


Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Merger Simulation





the merger














Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix













Post-merger






Duopoly AA amp US [008025] [001002] [005011] [000001]




Duopoly AA amp US [-012-001] [-001003] [-006000] [000004]










Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix









Conclusions






LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

LCC [-004-002]WN [-005-002]UA [-004-003]WN [-002-002]




DL [002009] [019025] LCC [007019] [002014] UA [004012] [010021] WN [001004] [010019]









DL [-012-008] DL LCC

[-005-003] DL [-003 -001] [-001-001] LCC [-001-000]

UA [-0015 -0010]

DL LCC UA WN

[-002 -001] [-000-000] [-001-001] [-001-000]

LCC [-010-009] DL UA

[-004-002] DL [-0028-0014] [-002-002] LCC [-0008-0004]

WN [-0012-0008] UA [-012-009] DL

WN [-005-003] DL [-0021-0013] [-002-001] UA [-0016-0010]

WN [-0008-0006] WN [-011-008]


LCC UA

[-002-001] LCC [-0011-0005] [-004-003] UA [-0025-0015]





DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix




DL [003005] DL [005015] LCC [001001]

LCC [009016] DL [004014] UA [001005]

UA [006008] DL WN


Duopoly 3-opoly


DL [-002004] AA [-007-005] DL [-003-000] AA [-001006] LCC [-002001]

LCC [001007] AA [-007-004] DL [-003003] AA [-002-000] UA [-003002]

UA [001008] AA [-005-002] DL [-001001] AA [-004-001] WN [-002003]


Appendix

Market Structure and Competition in Airline Markets · Price ($) 243.21 54.20 139.5 385.5 20,470...

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