Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/30476
Authors: 
Brueckner, Jan Keith
Proost, Stef
Year of Publication: 
2009
Series/Report no.: 
CESifo Working Paper 2848
Abstract: 
This paper offers the first formal economic analysis of carve-outs under airline antitrust im- munity. 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.
Subjects: 
carve-out
alliance
antitrust immunity
airlines
JEL: 
L40
Document Type: 
Working Paper

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