Ciliberto, Federico and Schenone, Carola (2010): Bankruptcy and Product-Market Competition: Evidence from the Airline Industry.
Download (402kB) | Preview
We investigate the effects of Chapter 11 bankruptcy filings on product market competition using data from the US airline industry. We find that bankrupt airlines permanently downsize their national route structure, their airport-specific networks, and their route-specific flight frequency and capacity. We also find that bankrupt airlines lower their route-specific prices while under bankruptcy protection, and increase them after emerging. We do not find robust evidence of significant changes by the bankrupt airline's competitors along any of the dimensions above. Overall, our results are consistent with the hypothesis that bankruptcy is the result of a war of attrition over capacity and network cutbacks.
|Item Type:||MPRA Paper|
|Original Title:||Bankruptcy and Product-Market Competition: Evidence from the Airline Industry|
|Keywords:||Airline Industry, Bankruptcy, Product Market Competition, Chapter 11, War of Attrition, Capacity Reduction|
|Subjects:||K - Law and Economics > K2 - Regulation and Business Law
G - Financial Economics > G3 - Corporate Finance and Governance
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
|Depositing User:||Federico Ciliberto|
|Date Deposited:||14. Sep 2010 11:49|
|Last Modified:||11. Feb 2013 18:36|
 Viral V. Acharya and Krishnamurthy V. Subramanian, "Bankruptcy Codes and Innovation," Review of Financial Studies, 22(12), 4949-4988, 2009.
 Ashenfelter O., �Estimating the E¤ect of Training Programs on Earnings,�The Review of Economics and Statistics, Vol. 60, No. 1 (Feb., 1978), pp. 47-57.
 Bamberger Gustavo E., Carlton, Dennis W., �Airline Networks and Fares,� Handbook of Airline Economics, 2nd ed., Darryl Jenkins, ed., McGraw Hill (2003).
 Berry, Steven., �Airport Presence as Product Di¤erentiation,� American Eco- nomic Review, May, 1990, 80, 394-399. 33
 Berry, Steven, �Estimation of a Model of Entry in the Airline Industry,�Econo- metrica 1992, 60, 889-917.
 S. Berry and P. Jia , �Tracing the woes: An empirical analysis of the airline industry. MIT, Working Paper, 2010
 Marianne Bertrand & Esther Du�o & Sendhil Mullainathan, 2004. "How Much Should We Trust Di¤erences-in-Di¤erences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
 Borenstein, Severin, �Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry,�Rand Journal of Economics, Autumn 1989, 20: 344-365
 Borenstein Severin, and Rose, Nancy, �Bankruptcy and pricing behavior in the US airline markets,�American Economic Review Papers and Proceedings, May 1995, 85, 397-402
 Borenstein Severin and Rose Nancy, �The Impact of Bankruptcy on Airline Service Levels,�American Economic Review Papers and Proceedings, 93 (May 2003).
 Bris, Arturo, Welch, Ivo, and Zhu, Ning, �The Costs of Bankruptcy�, The Jour- nal of Finance, 2006, 61, 1253-1303.
 Brueckner Jan K., and Spiller, Pablo, �Economies of Tra¢ c Density in the Deregulated Airline Industry,� Journal of Law and Economics, October 1994, 37, 379-415.
 Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. �Fare Determi- nation in Airline Hub-and-Spoke Networks,�RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
 Brueckner and Zhang, 2001 J.K. Brueckner and Y. Zhang, A model of scheduling in airline networks: how a hub-and-spoke system a¤ects �ight frequency, fares and welfare, Journal of Transport Economics and Policy 35 (2001), pp. 195�222. View Record in Scopus j Cited By in Scopus (23)
 Campello, Murillo, �Debt Financing: Does it Boost or Hurt Performance in Product Markets?�Journal of Financial Economics, 2006, 83, 135-172.
 Chevalier, Judith, �Do LBO Supermarkets charge more? An empirical analysis of the e¤ects of LBO on supermarket pricing��Journal of Finance, 1995a, 50, 1095-1112.
 Chevalier, Judith, �Capital Structure and Product-Market Competition: Em- pirical Evidence from the Supermarket Industry,�American Economic Review, 1995b, 85, 415-435.
 Chevalier, Judith, and Scharfstein, David, �Capital-Market Imperfections and Countercyclical Markups: Theory and Evidence,�The American Economic Re- view, September 1996, 86, 703-725.
 Chevalier, Judith, and Scharfstein, David, �Liquidity Constraints and the Cycli- cal Behavior of Markups,�American Economic Review, May 1995, 85, 390-396.
 Ciliberto, Federico and Williams, Jonathan, �Limited Access to Airport Facilities and Market Power in the Airline Industry,�2007, Working Paper, University of Virginia.
 Ciliberto, Federico, and Tamer, Elie, �Market Structure and Multiple Equilibria in Airline Markets,�Econometrica, Vol. 77, No. 6 (November, 2009), 1791-1828.
 Dasgupta, Sudipto, and Titman, Sheridan, �Pricing Strategy and Financial Pol- icy,�Review of Financial Studies, Winter 1998, 11, 705-737.
 Eraslan, Hulya K., �Corporate Bankruptcy Reorganizations: Estimates from a Bargaining Model,�International Economic Review, 2008, 49:2, 659-681.
 Eraslan, Hulya K., and Yilmaz, Bilge, �Deliberation and Security Design in Bankruptcy,�2008, Working Paper, Wharton School of Management.
 Friedberg L., �Did Unilateral Divorce Raise Divorce Rates? Evidence from Panel Data,�The American Economic Review, Vol. 88, No. 3 (Jun., 1998), pp. 608-627
 Hendel, Igal, �Competition Under Financial Distress, �The Journal of Industrial Economics,�September 1996, 44, 309-324.
 Halvorsen R. and Palmquist R, �The interpretation of dummy variables in semi- logarithmic equations,�American Economic Review 70, 474-5.
 Philippe Jorion and Gaiyan Zhang, "Credit Contagion from Counterparty Risk," Journal of Finance, forthcoming.
 Kennedy, P.E., �Estimation with correctly interpreted dummy variables in semi- logarithmic equations,�American Economic Review, 71, 801.
 Khanna, Naveen, and Tice, Sheri, �Pricing, exit, and location decisions of �rms: Evidence on the role of debt and operating e¢ ciency,� Journal of Financial Economics, 2005, 75, 397-427
 Kovenock, Dan, and Gordon, Phillips, �Capital Structure and Product Market Behaviour: An Examination of Plant Exit and Investment Decisions,�Review of Financial Studies, Autumn 1997, 10, 767-803.
 Opler, Tim, and Titman, Sheridan, �Financial Distress and Corporate Perfor- mance,�Papers and Proceedings Journal of Finance, July 1994, 49, 1015-1040.
 Phillips, Gordon, �Increased Debt and Industry Product Markets: An Empirical Analysis,�Journal of Financial Economics, 1995, 37, 189-238.
 Rose, Nancy, �Fear of Flying? Economic Analyses of Airline Safety,�The Journal of Economic Perspectives, 1992, 6(2), 75-94.
 Yuya Takahashi, "Estimating a War of Attrition: The Case of the US Movie Theater Industry," Working Paper, University of Wisconsin, 2010.
 Veerbek, M. and T. Nijman, �Testing for Selectivity Bias in Panel Data Models,� International Economic Review, 1992, 33(3), pp. 681-703.
 Michelle J. White, "Bankruptcy Costs and the New Bankruptcy Code," The Journal of Finance, Vol. 38, No. 2, Papers and Proceedings Forty-First Annual Meeting American Finance Association New York, N.Y. December 28-30, 1982 (May, 1983), pp. 477-488
 Michelle J. White, "Bankruptcy Reform and Credit Cards," Journal of Economic Perspectives, Volume 21, Number 4, Fall 2007, pp. 175�199.
Available Versions of this Item
- Bankruptcy and Product-Market Competition: Evidence from the Airline Industry. (deposited 14. Sep 2010 11:49) [Currently Displayed]