Does multimarket contact facilitate tacit collusion? Inference on conduct parameters in the airline industry.

We provide empirical evidence that multimarket contact facilitates tacit collusion among airlines using a flexible model of oligopolistic behavior, where conduct parameters are modelled as functions of multimarket contact. We find (i) carriers with little multimarket contact do not cooperate in sett...

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Detalles Bibliográficos
Publicado en:	RAND Journal of Economics (Wiley-Blackwell) Vol. 45; no. 4; pp. 764 - 792
Autores principales:	Ciliberto, Federico, Williams, Jonathan W.
Formato:	Artículo
Publicado:	Wiley-Blackwell Winter2014
Materias:	Consumer behavior Competitor orientation Direct costing Cost estimates Airline industry
Acceso en línea:	Ver este registro en EBSCOhost

Descripción
Sumario:	We provide empirical evidence that multimarket contact facilitates tacit collusion among airlines using a flexible model of oligopolistic behavior, where conduct parameters are modelled as functions of multimarket contact. We find (i) carriers with little multimarket contact do not cooperate in setting fares, whereas carriers serving many markets simultaneously sustain almost perfect coordination; (ii) cross-price elasticities play a crucial role in determining the impact of multimarket contact on equilibrium fares; (iii) marginal changes in multimarket contact matter only at low or moderate levels of contact; (iv) assuming firms behave as Bertrand-Nash competitors leads to biased estimates of marginal costs.