Common Subcontracting and Airline Prices

Gaurab Aryal (), Dennis J. Campbell, Federico Ciliberto and Ekaterina A. Khmelnitskaya

Papers from arXiv.org

Abstract: In the US airline industry, independent regional airlines fly passengers on behalf of several national airlines across different markets, giving rise to $\textit{common subcontracting}$. On the one hand, we find that subcontracting is associated with lower prices, consistent with the notion that regional airlines tend to fly passengers at lower costs than major airlines. On the other hand, we find that $\textit{common}$ subcontracting is associated with higher prices. These two countervailing effects suggest that the growth of regional airlines can have anticompetitive implications for the industry.

Date: 2023-01, Revised 2023-12
New Economics Papers: this item is included in nep-com, nep-ind, nep-reg, nep-tre and nep-ure
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