Publications
"Tacit Collusion and Price Dispersion in the Presence of Southwest Airlines" (with Myongjin Kim and Kerry Tan), Southern Economic Journal, 88(1), July 2021, 3-32.
We study the impact of tacit collusion on price dispersion in the U.S. airline industry. We find that tacit collusion driven by multimarket contact has a positive effect on prices, but a negative effect on price dispersion. Our empirical results suggest that airfares throughout the price distribution increases, yet the price distribution becomes more compressed since 10th percentile airfares increase by a larger amount than 90th percentile airfares. Moreover, we also find that this pricing phenomenon does not exist if Southwest Airlines is present on the route. Thus, route-level price competition is softened when the same airlines directly compete more frequently, except when Southwest Airlines services that route. As such, our empirical analysis provides evidence that the presence of Southwest Airlines exhibits an anti-collusive effect.
"Mergers and Labor Market Outcomes in the United States Airline Industry" (with Qi Ge and Myongjin Kim), Contemporary Economic Policy, 39(4), October 2021, 849-866.
This article examines US airline mergers between 1993 and 2018 and studies their impact on the labor market. Our difference-in-differences estimates indicate a significant reduction in the merging airlines' long-term wage and fringe benefits following the mergers. The effect is particularly salient among large-scale mergers involving major airlines and low cost carriers. The results also suggest a negative short-term employment impact of mergers that varies by occupation types. Our findings are consistent with the impact of merger-induced monopsony power discussed in recent literature and offer important policy implications regarding how to account for employer monopsony power during mergers and acquisitions.
Working Papers
"Network Structures and Resilience of Supply: Insights from the U.S. Airline Industry" (with Qi Ge, Myongjin Kim and Jangsu Yoon), 2021, under review.
This paper explores how firms' network structures are linked to the resilience of their supply. We focus on the U.S. airline industry and leverage different phases of travel restrictions and vaccine rollouts during the COVID-19 pandemic as natural experiments to examine how major carriers' output responses to these unexpected policy shocks are related to their outsourcing strategies on individual routes, encompassing full-scale outsourcing, integration, or a combination of both. Our results indicate that carriers' flight operations are negatively (positively) correlated with travel restrictions (vaccine rollouts). These operational adjustments tend to be made on routes where carriers adopt a hybrid operation strategy, as opposed to routes that are either fully outsourced or fully integrated. Such a tendency allows carriers to promptly and flexibly adapt to unforeseen shocks while ensuring supply resilience.
"Labor Unions and Product Quality: A Case Study of the U.S. Airline Industry" (with Qi Ge, Myongjin Kim and Jangsu Yoon), 2020.
This paper examines the impact of labor unions on firms' quality provisions through the lens of recent unionization episodes by American Airlines and Frontier Airlines. Leveraging flight-level on-time performance data, our empirical results consistently indicate that airline quality provisions, in the form of on-time performance, tend to worsen following the unionization announcement, with the effect being more salient in the long run. Further analyses suggest that the observed average quality impact is likely driven by those severely delayed flights and that the worsening of on-time performance is accompanied by a decline in the carrier's overall customer service quality.
"Spillover Impact of Airline Bankruptcy: Evidence from Housing Market in Smaller Cities" (with Qi Ge, Myongjin Kim, Joe Mazur and Sean Oconnor), 2018.
We match bankruptcy and shutdown episodes of regional airlines in the U.S. between 1995 and 2017 with a novel and comprehensive dataset on property transactions across the U.S. Our empirical findings confirm a spillover effect of airline bankruptcy on real estate prices. In particular, we find that cities between 60 and 100 miles from the closest regional airports experience a decrease in housing transaction prices in response to regional airlines' bankruptcies. Furthermore, we find that the spillover effect is related to the ownership structure of the involved regional airlines, with the housing price response being much stronger under bankruptcy episodes from independently owned airlines compared to those that are wholly owned.
"Entry Threat and Price Dispersion: Evidence from US Airline Mergers" (with Qi Ge and Myongjin Kim), 2021.
"The Financial Impact of COVID-19 on Publicly Traded Healthcare Firms" (with Junying Zhao and Myongjin Kim), 2021.
Work in Progress
"Subcontracting and Tacit Collusion in the Airline Industry" (with Silke Forbes, Myongjin Kim and Joe Mazur).
"Product Unbundling and Consumer Welfare: A Study of Full Fare Advertising Rule" (with Qi Ge and Myongjin Kim).
"Marijuana Legalization and Inequality: Evidence from the US Housing Markets" (with Myongjin Kim).
"Second Degree Price Discrimination with Heterogeneous Consumer Group Competition".