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Regulation and Incentives in European Aviation

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  • Gagnepain, Philippe
  • Marín Uribe, Pedro Luis

Abstract

The aim of this Paper is to evaluate simultaneously market power and the incentives faced by carriers to improve efficiency, taking into account the regulatory changes that have affected the European airline industry. We construct and estimate a model that includes demand, capacity, and cost equations. The latter accounts for inefficiency and cost-reducing effort. Using a non-nested test and observations on the largest European airlines between 1985 and 1999, we show the importance of following such an approach. We also find that the introduction of the last EU package of deregulatory measures has affected carriers’ behaviour in a significant manner.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4318.

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Date of creation: Mar 2004
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Handle: RePEc:cpr:ceprdp:4318

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Keywords: airlines; competition; efficiency; incentives; regulation;

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References

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  1. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research.
  2. Gagnepain, P. & Ivaldi, M., 1999. "Incentive Regulatory Policies: the Case of Public Transit Systems in France," Papers 99.515, Toulouse - GREMAQ.
  3. Gagnepain, P. & Ivaldi, M., 1998. "Stochastic Frontiers and Asymmetric Information Models," Papers 98.503, Toulouse - GREMAQ.
  4. Neven, Damien J. & Roller, Lars-Hendrik, 1996. "Rent sharing in the European airline industry," European Economic Review, Elsevier, vol. 40(3-5), pages 933-940, April.
  5. Ng, Charles K & Seabright, Paul, 2001. "Competition, Privatisation and Productive Efficiency: Evidence from the Airline Industry," Economic Journal, Royal Economic Society, vol. 111(473), pages 591-619, July.
  6. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  7. Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 141-59, June.
  8. Phlips,Louis, 1995. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521498715, April.
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Citations

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Cited by:
  1. Philippe Gagnepain & Pedro Marín, 2010. "The effects of airline alliances: what do the aggregate data say?," SERIEs, Spanish Economic Association, vol. 1(3), pages 251-276, July.
  2. Gagnepain, Philippe & Ivaldi, Marc, 2005. "Measuring Inefficiencies in Transport Systems: Between Technology and Incentives," IDEI Working Papers 377, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Paul W. Dobson & Claudio A. Piga, 2009. "Mergers and Business Model Assimilation: Evidence from Low-Cost Airlines Takeovers," Discussion Paper Series 2009_2, Department of Economics, Loughborough University, revised Feb 2009.
  4. Miguel Urdánoz & Catherine Vibes, 2013. "Regulation and cost efficiency in the European railways industry," Journal of Productivity Analysis, Springer, vol. 39(3), pages 217-230, June.
  5. Gagnepain, Philippe & Marín Uribe, Pedro Luis, 2005. "Alliances in the Air: Some Worldwide Evidence," CEPR Discussion Papers 5063, C.E.P.R. Discussion Papers.

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