Competition and service quality: New evidence from the airline industry

Previous studies examine the relationship between competition and airline service quality by regressing on-time performance on market structure. These studies implicitly assume that market structure is exogenously determined with respect to service quality. To address the likely endogeneity of market structure l employ two distinct instrumental variables. The first is lagged market structure. The second exploits a global airline merger that induced differential variations in market structure across hundreds of airport-pair markets. I find that the effect of competition on airline delays is three times stronger than previous studies suggest. (C) 2014 Elsevier Ltd. All rights reserved.