Does the Southwest Effect Still Exist?
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.
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.