Market power and volatility in the airline industry

Présentation de Stéphane Gauthier (PSE, Université Paris 1 Panthéon Sorbonne)

17-10-09_Gauthier Stephane

Lundi 9 octobre 2017 - 14h15-15h45, Salle SH027, MRSH Caen

Présentation de Stéphane Gauthier (PSE, Université Paris 1 Panthéon Sorbonne), en collaboration avec Alexandra Belova (PSE, Université Paris 1) et Philippe Gagnepain (PSE, Université Paris 1)

Résumé / Abstract :
This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favor uniqueness of the ationalizable outcome. When one requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic coordination uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers.