Price wars and price collusion in China's airline markets

Zhang, Yahua and Round, David K. (2011) Price wars and price collusion in China's airline markets. International Journal of Industrial Organization, 29 (4). pp. 361-372. ISSN 0167-7187

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Abstract

In the absence of an effective antitrust law, both fare wars and price collusion have been pervasive in China’s airline markets, causing concern for both airlines and consumers. A study of monthly airfare data from 2002 to 2004 confirms that fare wars occur periodically, as well as price collusion. Both tend to be short-lived. The fact that collusion is more likely to occur in January and April when demand is high, as revealed by China Eastern’s and China Southern’s price-war and collusion models, has been confirmed by interview information obtained from the airlines’ sales managers. However, there is also evidence in these models suggesting that collusion can be more easily formed when demand is low. High airport concentration measured by the HHI may facilitate collusion in certain circumstances, but it may also lead to more price wars under other conditions. Concentration in both airports and routes does not appear to systematically affect the occurrence of fare wars and collusion in all the models estimated. We also reject the possibility that mutual forbearance due to multimarket contact plays any important anti-competitive role in China’s airline markets.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Accepted Version deposited in accordance with the copyright policy of the publisher. The published version at http://www.sciencedirect.com remains the primary version of record.
Depositing User: Dr Shane Zhang
Faculty / Department / School: Historic - Faculty of Business and Law - School of Accounting, Economics and Finance
Date Deposited: 25 Jul 2011 11:19
Last Modified: 03 Jul 2013 00:41
Uncontrolled Keywords: price wars; collusion; airline market; China; restrictive trade practices
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1505 Marketing > 150507 Pricing (incl. Consumer Value Estimation)
22 Philosophy and Religious Studies > 2201 Applied Ethics > 220102 Business Ethics
14 Economics > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910203 Industrial Organisations
Identification Number or DOI: doi: 10.1016/j.ijindorg.2010.07.005
URI: http://eprints.usq.edu.au/id/eprint/19232

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