Do horizontal mergers induce entry? Evidence from the US airline industry

Abstract

Theoretical research has investigated the relevance of entry-inducing effects as countervailing factor to a merger-related increase in market power. We use route-level data for the America West Airlines–US Airways merger (2005) to investigate whether such an effect can be identified empirically. Our results show that both entry-inducing and entry-dissuading effects can be observed depending on the type of affected route and the carrier under investigation.

Keywords:

• airline industry
• merger
• entry-inducing effects

JEL Classification:

• L40
• L93