Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand
Abstract
Frequent flyer programs (FFPs) may allow airlines to exercise market power on routes that depart from airports at which they are dominant. Prior research, however, has not disentangled the effects of FFPs from other advantages that dominant airlines may possess. I exploit variation in the extent and scope of U.S. airlines' FFP partnerships with international carriers to evaluate the economic impact of enhancements to FFPs. The results indicate that enhancements to an airline's FFP are associated with increases in its demand on specifically those routes that depart from airports at which it is dominant.
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Because the paper employs carrier-route fixed effects, market power on specific routes exerted through frequent-flyer programs is differenced out.
“For example, because we employ carrier-routefixed effects, market power on specific routes exerted through frequent-flyer programs (Lederman, 2007) is differenced out in our regressions.”
From Anticompetitive Effects of Common Ownership (2018) · cites this paper as Lederman, 2007
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Anticompetitive Effects of Common Ownership
AZAR, J., SCHMALZ, M. C., & TECU, I. (2018) · The Journal of Finance · doi:10.1111/jofi.12698 · Cited by 980 · see citing works
“Relatedly, because we employ route-fixed effects, market power on specific routes exerted through frequent-flyer programs (Lederman, 2007) is differenced out in our regressions.”
BackgroundMethod
- Authors
- Lederman, M.
- Affiliations
- University of Toronto (CA)
- Corresponding author
- Lederman, Mara
- Venue
- The RAND Journal of Economics
- Publisher
- Wiley
- Published
- 2007-12
- Volume
- 38
- Issue
- 4
- Pages
- 1134-1158
- ISSN
- 0741-6261 (ISSN-L)
- 1756-2171
- OpenAlex
- W2130811045
- Cited by
- 131
- References
- 0
- Citations by year
- 2026: 4 · 2025: 5 · 2024: 1 · 2023: 2 · 2022: 6 · 2021: 5 · 2020: 4 · 2019: 10 · 2018: 13 · 2017: 4 · 2016: 14 · 2015: 9 · 2014: 10 · 2013: 10 · 2012: 6
- FWCI
- 11.01
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The RAND Journal of Economics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Aviation Industry Analysis and Trends
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Keywords
- frequent flyer programs, air travel demand, airline market power, airline alliances, airline competition, airline pricing
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