Carve-Outs Under Airline Antitrust Immunity

Jan Brueckner and Stef Proost

No 91004, Working Papers from University of California-Irvine, Department of Economics

Abstract: This paper offers the first formal economic analysis of carve-outs under airline antitrust immunity. Carve-outs are designed to limit the potential anticompetitive effects of cooperation by alliance partners in hub-to-hub markets, where they provide overlapping nonstop service. While the paper shows that carve-outs are beneficial when the alliance does not involve full integration of the partners' operations on the hub-to-hub route, its key point is that a carve-out may be harmful when imposed on a joint-venture alliance. A JV alliance involves full exploitation of economies of traffic density on the hub-to-hub route, and a carve-out prevents the realization of these benefits. While a carve-out may limit anticompetitive incentives on the hub-to-hub route, welfare may be reduced if the resulting gains are overshadowed by the efficiency loss generated by the carve-out.

Keywords: Carve-out; Antitrust immunity; Airline alliances (search for similar items in EconPapers)
JEL-codes: L4 L9 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2009-10
New Economics Papers: this item is included in nep-com
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https://www.economics.uci.edu/files/docs/workingpapers/2009-10/brueckner-4.pdf (application/pdf)

Related works:
Journal Article: Carve-outs under airline antitrust immunity (2010)
Working Paper: Carve-Outs under Airline Antitrust Immunity (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:091004

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