Monday, November 12, 2007
Posted by D. Daniel Sokol
Severin Borenstein (Berkeley Haas School of Business) and Nancy L. Rose (MIT Economics Department) write on How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry.
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.