Entry deterrence due to brand proliferation: Empirical evidence from the German interurban bus industry

Samuel de Haas (), Daniel Herold and Jan Thomas Schaefer ()
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Samuel de Haas: Justus-Liebig-University Giessen
Daniel Herold: Justus-Liebig-University Giessen
Jan Thomas Schaefer: Justus-Liebig-University Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: In 2016, the largest operator in the German interurban bus industry, Flixbus, acquired its major rival, Postbus. We study the effects of that takeover using route-level data covering more than 6,000 routes. We find that Flixbus, on average, provided a lower frequency of bus rides and slightly decreased prices after the takeover. This indicates that Flixbus pursued a strategy of preemption: to decrease residual demand for Postbus, Flixbus offered a high number of bus rides. After the takeover, Flixbus decreased the supply of transportation services and lowered the prices to compensate the consumers for the resulting increase in inconvenience costs.

Keywords: Competition; Takeover; Interurban Bus Services; Brand Proliferation; Entry Deterrence (search for similar items in EconPapers)
JEL-codes: K21 K23 L11 L41 L92 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2017
New Economics Papers: this item is included in nep-com, nep-eur, nep-ind, nep-law, nep-reg and nep-tre
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