SKYTRAINS: COMPETITIVE PRICING, QUALITY OF SERVICE AND THE DEREGULATION OF THE AIRLINE INDUSTRY

The paper explores, with use of simple diagrams, the welfare implications of free competition -- deregulation -- in the airline industry. No-frill flights introduced by Freddie Laker have amply demonstrated that a potentially large demand for air travel existed. This large demand has hitherto been neglected by regular airlines. Also the success of "Skytrains" has shown the importance of quality as well as price in air travel; many travelers are willing to sacrifice high quality for low fare. The paper illustrates the importance of quality and demonstrates how free competition can improve the welfare of air travelers by providing them options to choose from various quality and price combinations. /Author/

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  • Accession Number: 00301772
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Mar 20 1980 12:00AM