On the Efficiency of Codeshare Contracts Between Airlines: Is Double Marginalization Eliminated?
نویسنده
چکیده
The literature on the economics of airline codesharing has suggested that codeshare agreements serve to eliminate double marginalization that exists when unaffiliated airlines independently determine the price for different segments of an interline trip. Using a structural econometric model, this paper investigates whether codeshare contracts do eliminate double marginalization. The results suggest that codeshare contracts may eliminate upstream margin, leaving marginal cost and downstream margin as the determinants of price. However, the elimination of the upstream margin depends crucially on whether the upstream operating carrier also offers competing downstream products in the concerned market. Specifically, the vertical codeshare contract is found not to eliminate the upstream margin when the upstream operating carrier also offers competing downstream products. JEL Classification: L13, L93, C1, C2
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