Repositioning and market power after airline mergersSophia Li, Joe Mazur, Yongjoon Park, James Roberts, Andrew Sweeting, and Jun Zhang ,
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The RAND Journal of Economics
We estimate a model of route-level competition between airlines who choose whether to offer nonstop or connecting service before setting prices. Airlines have full information about all quality, marginal cost, and fixed cost unobservables throughout the game, so that service choices will be selected on these residuals. We conduct merger simulations that allow for repositioning and account for the selection implied by the model and the data.