Research Publication Title

Does the Southwest Effect Still Exist?

Major

Economics

Faculty Mentor(s)

Chris Clark

Keywords

Aviation, airlines, southwest airlines, AirTran, pricing, supply and demand, econometrics, regression, quantitive analysis, southwest effect

Abstract

A phrase coined by the US DOT, the Southwest Effect is a combination of dramatic increased supply and decreased prices after Southwest enters in a new market. However, after many years of increased airline competition and a more saturated industry, consumers are not seeing such results. Using a difference-in-difference model, I am utilizing the natural experiment that Southwest creates when it enters into new markets to determine if the Southwest Effect still exists. I expect to find that the Southwest Effect is still very prominent in new markets.

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Does the Southwest Effect Still Exist?

A phrase coined by the US DOT, the Southwest Effect is a combination of dramatic increased supply and decreased prices after Southwest enters in a new market. However, after many years of increased airline competition and a more saturated industry, consumers are not seeing such results. Using a difference-in-difference model, I am utilizing the natural experiment that Southwest creates when it enters into new markets to determine if the Southwest Effect still exists. I expect to find that the Southwest Effect is still very prominent in new markets.