Economies of Traffic Density in the Deregulated Airline Industry
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.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
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)
If references are entirely missing, you can add them using this form.