{"title":"Multimarket Contact and Capacity: Evidence from the US Airline Industry","authors":"Su, L Dresner","doi":"10.5325/transportationj.60.3.0258","DOIUrl":null,"url":null,"abstract":"Abstract:This study examines the relationship between multimarket contact (MMC) and competitive supply decisions by firms. Using US air-carrier traffic data, we find that a carrier's MMC is negatively associated with the available seats in a market. This finding provides support for the \"mutual forbearance hypothesis\" and suggests that MMC facilitates tacit collusion in the supply of capacity. We also find that tacit collusion may be more difficult to achieve on longer-distance routes, where carriers face difficulties monitoring the capacities of rivals that compete through indirect routings. On the longer-distance routes, the negative relationship between MMC and capacity thus diminishes. Finally, we show that the negative impact of MMC on capacity has increased in strength over the past 10 years. Since the impact of MMC on reducing capacity may lead to higher airfares, our findings contribute to important antitrust considerations.","PeriodicalId":46529,"journal":{"name":"Transportation Journal","volume":"60 1","pages":"258 - 306"},"PeriodicalIF":1.1000,"publicationDate":"2021-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Transportation Journal","FirstCategoryId":"5","ListUrlMain":"https://doi.org/10.5325/transportationj.60.3.0258","RegionNum":4,"RegionCategory":"工程技术","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"MANAGEMENT","Score":null,"Total":0}
引用次数: 3
Abstract
Abstract:This study examines the relationship between multimarket contact (MMC) and competitive supply decisions by firms. Using US air-carrier traffic data, we find that a carrier's MMC is negatively associated with the available seats in a market. This finding provides support for the "mutual forbearance hypothesis" and suggests that MMC facilitates tacit collusion in the supply of capacity. We also find that tacit collusion may be more difficult to achieve on longer-distance routes, where carriers face difficulties monitoring the capacities of rivals that compete through indirect routings. On the longer-distance routes, the negative relationship between MMC and capacity thus diminishes. Finally, we show that the negative impact of MMC on capacity has increased in strength over the past 10 years. Since the impact of MMC on reducing capacity may lead to higher airfares, our findings contribute to important antitrust considerations.
期刊介绍:
Transportation Journal is devoted to the publication of articles that present new knowledge relating to all sectors of the supply chain/logistics/transportation field. These sectors include supply chain/logistics management strategies and techniques; carrier (transport firm) and contract logistics firm (3PL and 4PL) management strategies and techniques; transport economics; regulation, promotion, and other dimensions of public policy toward transport and logistics; and education.