“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 Myongjin Kim and Qi Ge), 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.
"Labor Unions and Product Quality: A Case Study of the U.S. Airline Industry" (with Myongjin Kim and Qi Ge), 2020.
This paper examines the impact of labor unions on firms' quality provisions through the lens of two recent unionization episodes by American Airlines and Frontier Airlines. Leveraging granular on-time performance data from the Bureau of Transportation, our empirical results point to consistent evidence that airline quality provisions, in the form of total travel time and arrival delays, tend to worsen following the unionization episode, with the effect being more salient in the long run and noticeably larger in the case of Frontier Airlines than American Airlines. Further analyses indicate that the observed mean quality impact may be concurrent with a negative price effect and is likely driven by those already severely delayed fights, lending support toward both union-induced financial burdens and moral hazard as the potential explanations for the adverse quality impact.
Work in Progress
"Subcontracting and Tacit Collusion in the Airline Industry" (with Silke Forbes, Joe Mazur and Myongjin Kim), 2019.
"Airline Outsourcing Decisions During the COVID-19 Pandemic" (with Qi Ge and Myongjin Kim), 2020.
"Tax Reform and Product Quality Improvement" (with Myongjin Kim and Michael Luca), 2021.
"The Financial Impact of COVID-19 on Publicly Traded Healthcare Firms" (with Junying Zhao and Myongjin Kim), 2021.
"Second Degree Price Discrimination with Heterogeneous Consumer Group Competition".