MERGERS AND MARKET POWER -- EVIDENCE FROM THE AIRLINE INDUSTRY.

E Han Kim · Vijay Singal

630 citations0/0 files storedAmerican Economic Review

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Merger and Competition Analysis Aviation Industry Analysis and Trends Transport and Economic Policies

Abstract

This paper examines price changes associated with airline mergers during 1985-88, a period of natural experimentation in which mergers were not contested by the government. The results show that prices increased on routes served by the merging firms relative to a control group of routes unaffected by the merger. Mergers may lead to more efficient operations but, on the whole, the impact of efficiency gains on airfares is more than offset by exercise of increased market power. Copyright 1993 by American Economic Association.

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References

1983The market for corporate control 1988Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms 1988Takeovers: Their Causes and Consequences 1990Multimarket Contact and Collusive Behavior 1988The Market for Corporate Control: The Empirical Evidence Since 1980 1986Investment banking and the capital acquisition process 1983Horizontal mergers, collusion, and stockholder wealth 1983The rationale behind interfirm tender offers

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1998Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence From The Banking Industry 1998Wealth creation versus wealth redistributions in pure stock-for-stock mergers1We are grateful to Tom Arnold, Sanjai Bhagat, James Bicksler, David Blackwell, Ekkehart Boehmer, Ted Bos, Robert Brokaw, Bill Carleton, Bob Comment, Chris Cornwell, Mary Dehner, Bob Eisenbeis, Jimmy Hilliard, Randy Howard, Steve Jones, Ed Kane, Josef Lakonishok, Larry Lang, Bill Lewellen, Marc Lipson, Paul Malatesta, Jeff Netter, Cathy Niden, Volker Pollmann, Annette Poulsen, Jay Ritter, Richard Ruback, Louis Scott, Joe Sinkey, Bill Schwert (the editor), Ralph Walkling (the referee), Ron Warren, J. Fred Weston, Karen Wruck, and seminar participants at the University of Arizona, the University of Delaware, the University of Illinois, the University of Georgia, the University of Miami, Seattle University, the 1995 European Finance Association, the 1996 Financial Management Association, and the 1996 American Finance Association meetings for their helpful comments and recommendations. We also gratefully acknowledge the financial support provided for this project by the University of Georgia Research Foundation. Finally, Steve Henry, Rick McKinney, David Quillian, and Ryan Vaughn provided vital assistance with data collection and assisted with data input.1

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