The price-increasing effects of domestic Code-sharing agreements for non-stop Airline routes

gilo, david ; simonelli, felice;

This article assesses the impact of domestic code-sharing agreements on prices of
non-stop flights in the United States. The article finds a positive and significant
correlation between code-sharing agreements and the level of airfares, and considers
this to be the outcome of two anticompetitive effects: (1) a �round table�
effect, produced when the exchange of commercially sensitive information
among code-sharing partners facilitates coordination and collusion; and (2) a
�double marginalization� effect, produced when carriers use code sharing to add
a mark-up over their marginal costs. The article identifies an increase in airfares
charged by code-sharing partners of more than 5 percent attributable to the
�round table� effect. On top of this, the article finds further price hikes attributable
to the �double marginalization� effect: ticketing carriers involved in codesharing
flights charge fares more than 4 percent higher than fares set by their
code-sharing partner and almost 10 percent higher than other airlines in the
same market