MARKET INCENTIVES FOR SAFE COMMERCIAL AIRLINE OPERATION

Using a sample of nearly all fatal U.S. airline accidents between 1960 and 1985, this paper attempts to quantify the costs that airlines incur due to crashes. The potential costs include those due to loss of life and equipment, tort liability, increased regulatory oversight, and loss of demand as consumers turn away from products perceived to be unsafe. Examination of the deviations from expected demand following accidents reveals little or no effect prior to airline deregulation and weak indication of a response to recent crashes. These results are consistent with the changes in an airline's equity value following an accident, which are statistically significant, but quite small relative to the total social cost of the accident.

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• Corporate Authors:

  American Economic Association

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• Authors:
  • Borenstein, S
  • Zimmerman, M B
• Publication Date: 1988-12

Media Info

• Features: References; Tables;
• Pagination: p. 913-935
• Serial:
  • American Economic Review
  • Volume: 78
  • Issue Number: 5
  • Publisher: American Economic Association
  • ISSN: 0002-8282

Subject/Index Terms

• TRT Terms: Airlines; Costs; Crashes; Demand; Equity; Fatalities; Incentives; Markets; Safety and security; Transportation safety
• Uncontrolled Terms: Accident costs
• Subject Areas: Aviation; Economics; Finance; Highways; Safety and Human Factors; Society;

Filing Info

• Accession Number: 00485293
• Record Type: Publication
• Files: TRIS
• Created Date: Jul 31 1989 12:00AM