Airline Deregulation, Competitive Environment and Safety
Air traffic has substantially increased since the introduction of deregulation in both the USA and the European Union. Moreover, aircraft accidents involving fatalities have exhibited a downward trend over time. Still, a series of recently publicized accidents has raised again a serious issue, namely whether cost reduction in a deregulated aviation environment is achieved at the expense of safety standards. To address this question, the paper proposes a mathematical model, which highlights the relationship between competitive behaviour and tort liability. The model has important policy implications suggesting that the level of airline penalisation should be reduced when market rivalry is relaxed and conversely.
Volume (Year): 97 (2007)
Issue (Month): 1 (January-February)
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References listed on IDEAS
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- Raghavan, Sunder & Rhoades, Dawna L., 2005. "Revisiting the relationship between profitability and air carrier safety in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 283-290.
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- David E. M. Sappington, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring.
- Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-935, December.
- Papatheodorou, Andreas, 2002. "Civil aviation regimes and leisure tourism in Europe," Journal of Air Transport Management, Elsevier, vol. 8(6), pages 381-388.
- Nancy L. Rose, 1992.
"Fear of Flying? Economic Analysis of Airline Safety,"
Journal of Economic Perspectives,
American Economic Association, vol. 6(2), pages 75-94, Spring.
- Nancy L. Rose, 1991. "Fear of Flying? Economic Analysis of Airline Safety," NBER Working Papers 3784, National Bureau of Economic Research, Inc.
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