Domestic Code Sharing, Alliances, and Airfares in the U.S. Airline Industry

Harumi Ito and Darin Lee ()

Journal of Law & Economics, 2007, vol. 50, pages 355-380

Abstract: This paper examines the impact of domestic code-sharing alliances on airfares. Our analysis yields two novel and somewhat surprising findings that have yet to be documented in the literature. First, unlike with international code sharing, we find that the overwhelming majority of domestic code-share itineraries involve a single operating carrier, a phenomenon that we refer to as virtual code sharing. Second, we find that these virtual code-sharing itineraries are priced lower than itineraries operated and marketed by a single carrier in the same market. We suggest that carriers may be using virtual code sharing—in large part—as a generic product to compete for the most price-sensitive passengers.

Date: 2007

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Journal of Law & Economics is edited by Dennis W. Carlton, Austan Goolsbee, Randall S. Krosner, Douglas Lichtman and Edward A. Snyder

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