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Financial distress, bankruptcy protection and rivals' pricing behavior 
  • Renan Peres de Oliveira
Renan Peres de Oliveira
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Abstract

We develop a unifying framework to investigate the effects of a company's financial distress and its bankruptcy filing and acquisition events on rivals' airfares in a single econometric model. We evaluate the sample selection bias and endogenous relation associated with the nonrandom selection of markets by the bankrupt airline on its own and on its rivals' airfares, respectively. There is preliminary evidence that supports the existence of sample selection bias and endogeneity on the bankrupt airline's and on rivals' airfare models. Furthermore, no evidence was found of the competitors' nor the bankrupt firm's financial distress influencing the competitors’ average airfares.