Coordinated Capacity Reductions and Public Communication in the Airline Industry
Gaurab Aryal (),
Federico Ciliberto () and
No 8115, CESifo Working Paper Series from CESifo
We investigate whether legacy U.S. airlines communicated via earnings calls to coordinate with other legacy airlines in offering fewer seats on competitive routes. To this end, we first use text analytics to build a novel dataset on communication among airlines about their capacity choices. Estimates from our preferred specification show that when all legacy airlines in a market discuss the concept of “capacity discipline,” they reduce offered seats by 1.79%. We verify that this reduction materializes only when airlines communicate concurrently, and that it cannot be explained by other possibilities, including that airlines are simply announcing to investors their unilateral intentions to reduce capacity, and then following through on those announcements. Additional results from conditional-exogeneity tests and control function estimates confirm our interpretation.
Keywords: airlines; communication; capacity discipline; text data (search for similar items in EconPapers)
JEL-codes: D22 L13 L41 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind and nep-tre
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Working Paper: Coordinated Capacity Reductions and Public Communication in the Airline Industry (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8115
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