Journal
ECONOMETRICA
Volume 77, Issue 6, Pages 1791-1828Publisher
WILEY-BLACKWELL PUBLISHING, INC
DOI: 10.3982/ECTA5368
Keywords
Entry models; inference in discrete games; multiple equilibria; partial identification; airline industry; firm heterogeneity
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Funding
- National Science Foundation
- A. P. Sloan Foundation
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We apply this methodology to investigate the empirical importance of firm heterogeneity as a determinant of market structure in the U.S. airline industry. We find evidence of heterogeneity across airlines in their profit functions. The competitive effects of large airlines (American, Delta, United) are different from those of low cost carriers and Southwest. Also, the competitive effect of an airline is increasing in its airport presence, which is an important measure of observable heterogeneity in the airline industry. Then we develop a policy experiment to estimate the effect of repealing the Wright Amendment on competition in markets out of the Dallas airports. We find that repealing the Wright Amendment would increase the number of markets served out of Dallas Love.
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