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Carve-Outs Under Airline Antitrust Immunity

Author

Listed:
  • Jan K. Brueckner

    (Department of Economics, University of California-Irvine)

  • Stef Proost

    (Center for Economic Studies, KULeuven)

Abstract
This paper offers the first formal economic analysis of carve-outs under airline antitrust immunity. Carve-outs are designed to limit the potential anticompetitive effects of cooperation by alliance partners in hub-to-hub markets, where they provide overlapping nonstop service. While the paper shows that carve-outs are beneficial when the alliance does not involve full integration of the partners' operations on the hub-to-hub route, its key point is that a carve-out may be harmful when imposed on a joint-venture alliance. A JV alliance involves full exploitation of economies of traffic density on the hub-to-hub route, and a carve-out prevents the realization of these benefits. While a carve-out may limit anticompetitive incentives on the hub-to-hub route, welfare may be reduced if the resulting gains are overshadowed by the efficiency loss generated by the carve-out.

Suggested Citation

  • Jan K. Brueckner & Stef Proost, 2009. "Carve-Outs Under Airline Antitrust Immunity," Working Papers 091004, University of California-Irvine, Department of Economics.
    • Handle: RePEc:irv:wpaper:091004
    as

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    File URL: https://www.economics.uci.edu/files/docs/workingpapers/2009-10/brueckner-4.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Carve-out; Antitrust immunity; Airline alliances;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

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