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15. (ch9) Refer to the article "Does competition increase quality? Evidence from the US airline industry" (ch9 final version IJIO.pdf). This paper studies the impact of competition on quality provision in the US airline industry exploiting a novel source of exogenous variation in competition. While non-merging carriers reduced arrival delays only upon entry of the newly merged airline, the paper finds that incumbents decrease their cancelation rates and departure delays both upon merger announcement and entry of the newly merged airline.

a) Is the finding of the paper economically intuitive or counter-intuitive? Explain why.

b) The paper in turn suggests an increase in competition may increase consumer surplus. Provide the reasoning.

c) What is an expected effect of an increase in competition on the incumbent airlines' surplus (that is, (producer surplus)? Explain.