TY  - JOUR
AU  - Borenstein,Severin
AU  - Rose,Nancy L.
TI  - Do Airlines in Chapter 11 Harm Their Rivals? Bankruptcy and Pricing     Behavior in U.S. Airline Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5047
PY  - 1995
Y2  - February 1995
UR  - http://www.nber.org/papers/w5047
L1  - http://www.nber.org/papers/w5047.pdf
N1  - Author contact info:
Severin Borenstein
Haas School of Business
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-3689
E-Mail: borenste@haas.berkeley.edu

Nancy L. Rose
National Bureau of Economic Research
1050 Massachusetts Avenue
Cambridge, MA  02138
Tel: 617-613-1246
E-Mail: nrose@mit.edu
AB  - The behavior of firms in financial distress has attracted considerable academic and policy interest in recent years.  The turmoil in the U.S. airline industry has triggered much of the public policy discussion, as some observers have argued that airlines in financial distress, particularly those operating under Chapter 11 bankruptcy protection, reduce prices to the point of harming themselves and their competitors.  This study investigates the pricing strategies of bankrupt airlines and their rivals.  The data suggest that an airline's prices typically decline somewhat before it files for bankruptcy protection and remain slightly depressed over the subsequent two or three quarters.  We find no evidence that competitors of the bankrupt airline lower their prices, however, nor that they lose passengers to their bankrupt rival.  These results indicate that bankrupt carriers do not harm the financial health of their competitors.
ER  -