Date of Submission

Spring 2012

Academic Program


Project Advisor 1

Sanjaya Desilva

Abstract/Artist's Statement

Following deregulation of the airline industry in 1978, U.S. carriers established hub-and-spoke networks across the country. Sadly, in recent years, the benefits of such networks have hindered the development of the industry. This project evaluates hub-and-spoke networks and their relation to predatory practices in the U.S. airline industry. I employ a two-way fixed effects model that estimates the dynamic of price adjustments of legacy carriers upon threat and entry of a low-cost airline. By using this model, I am able to identify price adjustments as a strategic behavior over time. My results reveal large price cuts upon actual entry, as well as a trend towards cutting prices when the probability of new competition increases.

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