Is multimarket contact an antitrust concern? A case of China’s airline market

Wenliang Ma, Qiang Wang, Hangjun Yang and Yahua Zhang

Transportation Research Part A: Policy and Practice, 2020, vol. 132, issue C, 515-526

Abstract: When firms meet in more than one market, it is generally regarded that the possibility of collusion will increase because of mutual interdependence (or mutual forbearance). Mutual forbearance is tacit collusion that directly results from familiarity and deterrence. This paper examines the effect of multimarket contact on airline prices in the Chinese domestic airline market where private and low-cost carriers have been thriving and high-speed rail services growing quickly in the last few years. We find strong evidence supporting the mutual forbearance hypothesis in high revenue markets. We also find that the collusive effect due to increasing multimarket contact is insignificant within the same airline group, whereas multimarket contact between airlines in different airline groups triggers higher airfares.

Keywords: Multimarket contact; Price collusion; Mutual forbearance; China; Airline pricing (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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DOI: 10.1016/j.tra.2019.12.008

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