Integrating Industrial Organization and International Business to Explain the Cross-National Domestic Airline Merger Phenomenon

Joseph Clougherty

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization literature; yet, that literature neglected non-US merger activity and the potential for international competitive incentives. Using an International Business perspective to complement a primarily Industrial Organization analysis, I argue that factoring international competitive gains helps explain the domestic airline merger phenomenon. A Cournot model of airline competition illustrates the international incentives behind integrating domestic with international routes and behind acquiring domestic competitors. Further, comprehensive panel data tests also support large domestic networks and actual mergers improving the international competitiveness of airlines.

Keywords: airline-mergers; imperfect-competition; international-determinants (search for similar items in EconPapers)
Date: 2004-07
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