EQUILIBRIUM AND WELFARE IN UNREGULATED AIRLINE MARKETS

This paper introduces and analyzes a monopolistically competitive model of airline markets which takes account of the product differentation effect resulting from variation in flight departure times, and the effects of flight frequency and load factor on service quality. The basic results are that (1) when the direct benefits (to consumers) of increasing flight frequency are exhausted, socially optimal choices of price and frequency result in zero profits for the industry, but (2) a noncooperative, free entry equilibrium always results in higher prices, lower load factors, and greater frequency than are socially optimal.

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• Corporate Authors:

  American Economic Association

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• Authors:
  • Panzar, J C
• Publication Date: 1979-5

Media Info

• Features: Figures; References;
• Pagination: p. 92-95
• Serial:
  • American Economic Review
  • Volume: 69
  • Issue Number: 2
  • Publisher: American Economic Association
  • ISSN: 0002-8282

Subject/Index Terms

• TRT Terms: Airlines; Consumer protection; Deregulation; Market research; Prices; Stochastic processes; Traffic delays
• Subject Areas: Aviation; Data and Information Technology;

Filing Info

• Accession Number: 00196515
• Record Type: Publication
• Files: TRIS
• Created Date: Aug 28 1979 12:00AM