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How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry

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  • Severin Borenstein
  • Nancy L. Rose

Abstract

Following a brief review of the U.S. domestic airline industry under regulation (1938-1978), we study the changes that have occurred in pricing, service, and competition in the 28 years since deregulation. We then examine some of the major public policy issues facing the industry: (a) the sustainability of competition and volatility of airline profits, (b) possible market power of dominant airlines, and (c) congestion and investment shortfall in the airport and air traffic infrastructure.

Suggested Citation

  • Severin Borenstein & Nancy L. Rose, 2007. "How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry," NBER Working Papers 13452, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13452
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    6. Aguirregabiria, Victor & Ho, Chun-Yu, 2012. "A dynamic oligopoly game of the US airline industry: Estimation and policy experiments," Journal of Econometrics, Elsevier, vol. 168(1), pages 156-173.
    7. Douglas, Ian, 2019. "Do the Gulf airlines distort the level playing field?," Journal of Air Transport Management, Elsevier, vol. 74(C), pages 72-79.
    8. Hüschelrath, Kai & Müller, Kathrin, 2011. "Low cost carriers and the evolution of the US airline industry," ZEW Discussion Papers 11-051, ZEW - Leibniz Centre for European Economic Research.
    9. Steven Berry & Panle Jia, 2010. "Tracing the Woes: An Empirical Analysis of the Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 2(3), pages 1-43, August.
    10. Koopmans, Carl & Lieshout, Rogier, 2016. "Airline cost changes: To what extent are they passed through to the passenger?," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 1-11.
    11. Steven L. Puller & Anirban Sengupta & Steven N. Wiggins, 2009. "Testing Theories of Scarcity Pricing in the Airline Industry," NBER Working Papers 15555, National Bureau of Economic Research, Inc.
    12. Niklas S. Dürr & Sven Heim & Kai Hüschelrath, 2016. "Deregulation, Competition, and Consolidation: The Case of the German Interurban Bus Industry," Journal of Transport Economics and Policy, University of Bath, vol. 50(2), pages 164-16-188.
    13. Stefano Carattini & Alessandro Tavoni, 2016. "How green are economists?," GRI Working Papers 247, Grantham Research Institute on Climate Change and the Environment.
    14. Germá Bel & Xavier Fageda, 2009. "Factors Explaining Charges in European Airports: Competition, Market Size, Private Ownership and Regulation," Working Papers 2009-31, FEDEA.
    15. Abate, Megersa, 2016. "Economic effects of air transport market liberalization in Africa," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 326-337.
    16. Stefano Carattini & Alessandro Tavoni, 2016. "How green are green economists?," Economics Bulletin, AccessEcon, vol. 36(4), pages 2311-2323.
    17. Dürr, Niklas S. & Hüschelrath, Kai, 2016. "Deregulation and the determinants of entry: Evidence from the German interurban bus industry," ZEW Discussion Papers 16-054, ZEW - Leibniz Centre for European Economic Research.
    18. Dürr, Niklas S. & Hüschelrath, Kai, 2017. "Patterns of entry and exit in the deregulated German interurban bus industry," Transport Policy, Elsevier, vol. 59(C), pages 196-208.
    19. Le Huubinh B. & Yimga Jules, 2019. "Market Power and Marginal Cost Effects in Competing Markets: Evidence from Airline Mergers," Review of Network Economics, De Gruyter, vol. 18(2), pages 63-108, June.
    20. Kaukin, Andrey (Каукин, Андрей), 2018. "Diagnosis of the Growth Model of the Russian Air Transportation Market: Bottlenecks and Directions of Development [Диагностика Модели Роста Российского Рынка Авиаперевозок: Узкие Места И Направлени," Working Papers 061830, Russian Presidential Academy of National Economy and Public Administration.

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    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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