An Empirical Investigation of the Competitive Effects of Domestic Airline Alliances

In this paper, we investigate empirically the effect of two recent domestic airline alliances. We find that both alliances benefited consumers - average fares fell and total traffic increased after the creation of the alliances on those city pairs affected by the alliances. We also find that these effects are found both on city pairs where the alliance created one or two new online carriers, and on city pairs where the alliance increased the service offered by one or both alliance partners. Finally, we find that the size of the fare effect of the alliance depends on the pre-alliance level of competition on a city pair with the effect being larger on those city pairs where the level of competition was relatively low.

Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?

In 1991, the Antitrust Division sued MIT and the eight schools in the Ivy League under Section 1 of the Sherman Act for engaging in a conspiracy to fix the prices that students pay. The Antitrust Division claimed that the schools conspired on financial aid policies in an effort to reduce aid and raise their revenues. The schools justified their cooperative behavior by explaining that it enabled them to concentrate aid on only those in need and thereby helped the schools to achieve their goals of need-blind admission coupled with financial aid to all needy admittees. This paper analyzes the empirical determinants of tuition and finds that the schools' agreement had no effect on average tuition paid. The paper also analyzes the appropriate application of the antitrust laws to not-for-profit institutions. The Court of Appeals found that it is appropriate for the courts to consider non-profit institutions' justifications for collective action (in this case, to enable the poor to attend school) under a Rule of Reason. The Court of Appeals overturned the District Court's opinion against MIT, citing the failure of the District Court to properly apply the Rule of Reason.

Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?

In 1991, the U.S. Justice Department's Antitrust Division accused MIT and the Ivy League schools of fixing prices. The schools claimed that their cooperative behavior enabled them to concentrate financial aid on needy students and did not affect price. We analyze the empirical determinants of tuition and find no evidence that the schools' agreement raised price. We also analyze the appropriate application of the antitrust laws to nonprofit institutions and conclude that, in the absence of adverse price or output effects, the justification for the collective action should be considered under the "Rule of Reason."