This paper attempts to estimate what fares would be if U.S. air travel markets were unregulated, in order to determine the effects of regulation on the fares and market efficiency of the domestic airline industry. A long-run airline cost model is developed and estimated to predict hypothetical unregulated (or cost-based) fares for 30 high-density trunk airline routes. As a test, the model is used to predict fares on the relatively unregulated California intrastate routes, which it does quite accurately. The results indicate that as of 1968, regulated routes had markups over the estimated unregulated fares ranging from 20 to 95 percent, with a distinct tendency for markups to rise with distance. A rough update to 1972 shows markups of 48 to 84 percent, with less correlation between markup and distance. These findings indicate that airline regulation extracts high social costs on high-density routes, which helps bolster the case for deregulation.

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  • Supplemental Notes:
    • This paper was originally published in Bell Journal of Economics and Management Science, 3(2), Autumn 1972, pp 399-424.
  • Corporate Authors:

    Edward Elgar Publishers

    William Pratt House, 9 Dewey Court
    Northampton, MA  United States  01060-3815
  • Authors:
    • Keeler, T E
  • Publication Date: 2002


  • English

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Filing Info

  • Accession Number: 00961848
  • Record Type: Publication
  • ISBN: 1840645490
  • Files: TRIS
  • Created Date: Aug 21 2003 12:00AM