Xiaolan Zhou
Author information
Faculty of Economics and Management,East China Normal University,Shanghai 200062,China
E-mail: xiaolan.z.zhou@gmail.com
This paper studies airlines’ competitive behavior in the U.S. airline industry, focusing on 2014 data. I use a structural model to estimate demand and test several supply models, including noncooperative competition, perfect collusion, and tacit coordination. There are three different types of tacit coordination, formed by multimarket contact, common ownership, and codeshare agreement, respectively. I find that the model that fits the data best is a tacit coordination model with coalitions between airlines with at least 30% of their markets overlapped and using price rather than quantity as the strategic variable. I further analyze the consumer welfare loss, each carrier’s profit gains, and changes in market variables due to the tacit coordination.
Xiaolan Zhou. Welfare Analysis of Tacit Coordination in the U.S. Airline Industry. Front. Econ. China, 2017, 12(1): 66‒93 https://doi.org/10.3868/s060-006-017-0004-0