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Abstract

This paper proposes a novel approach to teaching about horizontal mergers. We use the case of the recent airline merger between American Airlines and US Airways to analyze its potential economic impacts. We describe the merger, discuss the institutional details of the US government’s decision-making process of approving or rejecting mergers, and explain the merger’s trade-offs using the Williamson model of market power and economic efficiency. The paper provides lecture materials, including an Excel simulation, presentation and sample assignments that can be used by instructors teaching undergraduate courses in intermediate microeconomics, managerial economics, industrial organization, and law and economics.

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