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The International Drivers of Domestic Airline Mergers in Twenty Nations: Integrating Industrial Organization and International Business

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Document pages: 47 pages

Abstract: The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization (IO) literature; yet, that literature neglected non-US domestic mergers and potential for international competitive gains. Using an International Business perspective to complement an IO analysis, I argue that factoring international competitive incentives helps explain domestic airline merger activity. A Cournot model of airline competition illustrates that domestic mergers, via enhanced domestic networks and reduced domestic competition, generate international competitive gains. Further, empirical tests - using a structural-equations approach on panel data covering international city-pair market segments - support domestic mergers improving international competitiveness.

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