Collude, Compete, or Both? Deregulation in the Norwegian Airline Industry

The purpose of this paper is to test the nature of competition concerning price and capacity setting in the Norwegian airline industry after the deregulation in 1994. Did the two airlines, SAS and Braathens, compete on prices and capacities (competition), collude on prices and capacities (collusion) or collude on prices and compete on capacities (semicollusion)? We reject the hypothesis that they achieved collusion, and we find the observed behaviour consistent with semicollusive behaviour and inconsistent with competitive behaviour. We discuss why this outcome is in stark contrast to the outcome of the U.S. deregulation.