Adaptation and Vertical Integration in the Airline Industry
Silke Januszewski Forbes and Mara Lederman
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| Article Citation |
Januszewski Forbes, Silke, and Mara Lederman. 2009. "Adaptation and Vertical Integration in the Airline Industry." American Economic Review, 99(5): 1831–49.
DOI:10.1257/aer.99.5.1831
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| Abstract |
We explore patterns of vertical integration in the US airline industry. Major airlines
subcontract portions of their network to regional partners, which may or
may not be owned. We investigate if ownership economizes on ex post renegotiation
costs. We estimate whether airlines are more likely to use owned regionals
on city pairs with adverse weather (which makes adaptation decisions more
frequent) and on city pairs that are more integrated into the major's network
(which raises the costs of having adaptation decisions resolved suboptimally).
Our results suggest a robust empirical relationship between adaptation and
vertical integration in this setting. (JEL L14, L22, L24, L93)
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| Additional Materials |
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| Authors |
Januszewski Forbes, Silke (U CA, San Diego)
Lederman, Mara (U Toronto)
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| JEL Classifications |
L14: Transactional Relationships; Contracts and Reputation; Networks
L22: Firm Organization and Market Structure
L24: Contracting Out; Joint Ventures; Technology Licensing
L93: Air Transportation
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