Competitive Effects of Common Ownership: Evidence from the Airline Industry

Citation data:

SSRN Electronic Journal

Publication Year:
2018
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SSRN
SSRN Id:
2427345
DOI:
10.2139/ssrn.2427345
Author(s):
Joss Azar; Martin C. Schmalz; Isabel Tecu
Publisher(s):
Elsevier BV
Tags:
Competition; Ownership; Diversification; Pricing; Antitrust; Governance; Product Market
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article description
Many natural competitors are jointly held by a small set of large institutional investors. In the US airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities. Within-route changes in common ownership robustly correlate with route-level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost – reduced product market competition – accompanies the private benefits of diversification and good governance.