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Regulatory reform and managerial choice: an analysis of the cost savings from airline deregulation


  • Margaret Peteraf

    (Tuck School of Business at Dartmouth, Hanover, NH, USA)

  • Randal Reed

    (Morgan State University, Baltimore, MA, USA)


This paper explores the question of how the differential exercise of managerial choice can facilitate organizational adaptation and improve efficiency over periods of regulatory change. We address this question in the context of the US airline industry, with a detailed decomposition of an airline cost function. Our findings suggest that managers employ choice in unconstrained domains to counteract the effects of constrained or pre-determined choices. This is an adaptive mechanism that helps firms adjust to environmental change or maneuver over a rugged landscape. We view this as a type of dynamic managerial capability for achieving dynamic fit under changing conditions. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Margaret Peteraf & Randal Reed, 2008. "Regulatory reform and managerial choice: an analysis of the cost savings from airline deregulation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(2-3), pages 99-116.
  • Handle: RePEc:wly:mgtdec:v:29:y:2008:i:2-3:p:99-116 DOI: 10.1002/mde.1397

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    References listed on IDEAS

    1. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
    2. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    3. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    4. Baltagi, Badi H & Griffin, James M & Rich, Daniel P, 1995. "Airline Deregulation: The Cost Pieces of the Puzzle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 245-260, February.
    5. Sickles, Robin C. & Good, David & Johnson, Richard L., 1986. "Allocative distortions and the regulatory transition of the U.S. airline industry," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 143-163.
    6. Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-399, May.
    7. 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.
    8. Kahn, Alfred E, 1988. "Surprises of Airline Deregulation," American Economic Review, American Economic Association, vol. 78(2), pages 316-322, May.
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    Cited by:

    1. Bitzan, John & Peoples, James, 2016. "A comparative analysis of cost change for low-cost, full-service, and other carriers in the US airline industry," Research in Transportation Economics, Elsevier, vol. 56(C), pages 25-41.

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