The airline industry provide a unique opportunity to test for market power using product prices. In the airline industry, each route can be considered a separate market. The routes not affected by mergers can serve as a control group to capture industry wide factors such as changes in fuel costs, labor cost, and seasonal variations in demand, as well as economy wide factors that influence airfares. Thus, airfares changes on routes affected by a merger., computed relative to the control group, can be attributed to the merger.
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