Assessing Firm Behavior in Carve-out Markets: Evidence on the Impact of Carve-out Policy

Gayle, Philip and Thomas, Tyson (2016): Assessing Firm Behavior in Carve-out Markets: Evidence on the Impact of Carve-out Policy. Forthcoming in: Journal of Economic Behavior & Organization

Abstract

Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). While cooperation may yield benefits, it can also have anti-competitive effects in markets where partners competed prior to receiving ATI. A carve-out policy forbids ATI partners from cooperating in markets policymakers believe will be most harmed by anti-competitive effects. We examine carve-out policy applications to three ATI partner pairings, and find evidence more consistent with cooperative pricing in carve-out markets in spite of the policy, calling into question the effectiveness of the policy in achieving intended market outcomes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Airline competition; Antitrust immunity; Carve-out Policy
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L4 - Antitrust Issues and Policies > L40 - General; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L93 - Air Transportation

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