IDEAS home Printed from
   My bibliography  Save this article

Economies of Traffic Density in the Deregulated Airline Industry


  • Brueckner, Jan K
  • Spiller, Pablo T


This article estimates a structural model of competition among hub-and-spoke airlines in order to measure the strength of economies of traffic density on individual route segments. We find that economies of density were strong during the sample period (fourth quarter 1985), stronger than previous estimates by Douglas Caves, Laurits Christensen, and Michael Tretheway derived from traditional cost-function methods. We also find that the airlines' competitive behavior was far from collusive in the markets under study (markets requiring a connection at a hub airport). Our structural model also provides plausible estimates of demand elasticities. We use our estimates to provide a cost-based rationale for the major changes in the structure of the industry following deregulation (for example, the increase in airport and industry-wide concentration, and the increase in competition at the city-pair market level) and to simulate the effects of a merger of airlines that share a hub. Copyright 1994 by the University of Chicago.

Suggested Citation

  • Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  • Handle: RePEc:ucp:jlawec:v:37:y:1994:i:2:p:379-415

    Download full text from publisher

    File URL:
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Bittlingmayer, George, 1990. "Efficiency and entry in a simple airline network," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 245-257, June.
    2. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
    3. Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-399, May.
    4. Bailey, Elizabeth E & Williams, Jeffrey R, 1988. "Sources of Economic Rent in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 31(1), pages 173-202, April.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:37:y:1994:i:2:p:379-415. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.