Multi-market Contact and Service Quality: Evidence from On-Time Performance in the US Airline Industry
2009, Academy of Management Journal
Jeff Prince, Daniel Simon
We examine the impact of multimarket contact on on-time performance in the airline industry. Using flight-level data for more than 3.5 million flights, we find that increases in multimarket contact lead to increases in delays, and this result is robust to several delay measures and the inclusion of carrier-route, as well as month, fixed effects. We further determine that the effect is primarily in the form of departure delays, and not due to changes in scheduled flight times or time spent in the air. These findings provide support for the mutual forbearance hypothesis, and suggest that multimarket contact facilitates tacit collusion not only on price - but also on quality.
Prince, Jeff and Daniel Simon (2009), “Multi-market Contact and Service Quality: Evidence from On-Time Performance in the US Airline Industry,” Academy of Management Journal, Vol. 52, No. 2, April, pp. 336-354.
Airlines, Multimarket contact, Mutual forebearance, On-Time performance