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Strategic uncertainty and market size: An illustration on the Wright amendment

Abstract : This paper exploits the repeal of the Wright amendment as a natural experiment in order to contribute to the ongoing discussion on how the enlargement of the relevant market affects the ability of firms to coordinate on a Nash equilibrium. Using data on the U.S. air transportation industry, we present a Difference-inDifference procedure which sheds light on the significant loss of accuracy in airlines' predictions in markets originating in Dallas after the Love Field airport started operating long distance services in 2014. This suggests that competition authorities should be careful when they refer to the Nash equilibrium following market expansion reforms.
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Preprints, Working Papers, ...
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Submitted on : Thursday, September 30, 2021 - 12:16:25 PM
Last modification on : Friday, April 29, 2022 - 10:13:24 AM
Long-term archiving on: : Friday, December 31, 2021 - 7:53:10 PM


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  • HAL Id : halshs-03359597, version 1



Philippe Gagnepain, Stéphane Gauthier. Strategic uncertainty and market size: An illustration on the Wright amendment. 2021. ⟨halshs-03359597⟩



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