Research

Working Papers and Research in Progress

  • Airline Code-sharing and Capacity Utilization (with Javad Gorjidooz)

    Airline Code-sharing and Capacity Utilization (with Javad Gorjidooz)

    Abstract

    Following the passage of the Airline Deregulation Act in 1978, the degree of competition among air carriers, increased significantly. Airlines have resorted to many ways—including alliance formation— in response to competitive pressures. These strategic alliances between airlines represent coordination at different operational levels. Although the effects of alliance formation on competition, consumer welfare and prices have been examined, there is little empirical research that measures the capacity utilization effects of domestic airline alliances. In this study, we empirically investigate the capacity utilization effects of the largest domestic alliance—between Delta Air Lines, Northwest Airlines and Continental Airlines. We find evidence that code-sharing improves alliance partners’ load factor on short-haul markets. However, we also find that on long-haul markets, the alliance partners’ load factor decreased over the pre- and post-alliance periods. Finally, we find no statistically significant change in load factor in markets where the partners competed in prior to the alliance.

  • Airline Alliance and Product Quality: The Case of the U.S. Domestic Airline Industry (with Philip Gayle)

    Airline Alliance and Product Quality: The Case of the U.S. Domestic Airline Industry (with Philip Gayle)

    Abstract

    Collusion on price and service levels tends to be the main concern of policymakers when appraising an airline alliance formation. We posit that product quality is an important dimension to be considered in alliance appraisals. This paper investigates the product quality implications of the Delta/Continental/Northwest codeshare alliance with a particular focus on the codeshare effects in markets where the alliance partners competed prior to the alliance. As expected, product quality for Delta/Continental/Northwest’s products decreased in markets with pre-alliance competition resulting in substantial negative welfare effects for passengers.

    Manuscript [PDF]

  • Merger Cost Effects based on Existence of Pre-merger Competition between Merger Firms (with Huubinh Le)

    Merger Cost Effects based on Existence of Pre-merger Competition between Merger Firms (with Huubinh Le)

    Abstract

    Anticompetitive effects of airline mergers due to increases in market concentration are a major concern for government regulators. Markets that are most susceptible to anticompetitive harm of higher concentration are those where the merging airlines offer competing services. However, these overlapping markets may experience some pro-competitive effects stemming from the possibility of cost efficiency gains that could translate into lower airfares. Therefore, the overall competitive effect in these overlapping markets is not clear. Most post-merger analyses have primarily focused on price effects rather than merger effects on cost or markup. This paper empirically examines the effects of two recent mergers—Delta/Northwest and United/Continental—on product marginal cost and markup, specifically in markets where the merging airlines previously competed. Without cost data, we use a method that allows us to derive product markups and recover marginal cost. Consistent with a difference-in-differences method, we identify marginal cost and markup effects by comparing the pre-post merger change relative to the change in the non-merging firms’ marginal cost and markup. We find that both mergers are associated with lower marginal costs but higher markups for products in markets where the merging airlines previously competed. The magnitude of the marginal cost decrease is greater than the increase in markup.

  • Should Microfinance Institutions Focus on Women? An Evaluation of the Effect of Female Lending on Microfinance Productivity and Efficiency (with Bebonchu Atems)

    Should Microfinance Institutions Focus on Women? An Evaluation of the Effect of Female Lending on Microfinance Productivity and Efficiency (with Bebonchu Atems)

     Abstract

    Most microfinance studies show that microfinance institutions (MFIs) disproportionately target women. These studies have examined the potential effects of access to microcredit for female borrowers but questions about the implications of such efforts for MFIs still remained largely unanswered. This paper fills this gap in the literature by empirically investigating how focusing on women affects MFI Productivity. We employ a two-stage process to determine how focusing on women impacts MFI productivity. In the first stage, MFI productivity is measured using a nonparametric Malmquist productivity index. In the second stage, we estimate the effect of focusing on women on MFI productivity. After controlling for MFI- and country-level characteristics, we find that a focus on women improves MFI (relative) productivity and efficiency.

  • Microfinance Expansion and its Effects on Cost Efficiency

    Microfinance Expansion and its Effects on Cost Efficiency

    Abstract

    This paper examines a key issue that has only begun to be investigated and thus far has been left largely unresolved—the scalability of the microfinance process. At the onset of any commercialization effort resides the implicit notion that a microfinance institution could make up for a loan-size disadvantage by disbursing enough small loans that would potentially translate in scale economies and thus cost efficiency gains. We test this assertion in the presence of “uncontrolled growth”—the surge in microfinance lending during the boom years of 2004–2008. In a nutshell, are cost efficiencies evident during rapid microfinance expansion? After controlling for microfinance institutional characteristics and macroeconomic indicators and using different estimation methodologies, we find that aggressive microfinance growth consistently results in cost inefficiency.