AIRLINE MERGERS AND COMPETITION - AN INTEGRATION OF STOCK AND PRODUCTPRICE EFFECTS

While research using stock prices has rejected the hypothesis that mar ket power is important in motivating horizontal mergers, studies of ai rfares find evidence consistent with a dominant role of market power i n airline mergers. I integrate the two lines of research by examining the same set of airline mergers from a capital market viewpoint. Furth er, I link changes in the stock market to changes in the product marke t, presenting a dual market perspective. I conclude that airline merge rs result in both increased market power and more efficient operations , The article has implications for antitrust policy.