ECONOMIES OF SCALE AND THE QUESTION OF "NATURAL MONOPOLY" IN THE AIRLINE INDUSTRY

The available evidence concerning the question of economies of scale and the possibility of natural monopoly in the American airline industry are reviewed and analyzed. The paper defines and discusses the general concepts of economies of scale and natural monopolies. The methods used to measure economies of scale are described, and actual estimates of airline scale economies (estimates at the company-wide level; city pairs and local networks) are reviewed, and the role of entry is briefly discussed. It is concluded that "natural monopoly" is not a serious problem for the airline industry. All of the current truck and local service carriers have reached a size at which scale no longer affects unit costs. Thus claims of economies of scale in support of proposed mergers deserve close scrutiny. The recent introduction of fare flexibility will surely not lead to the monopolizing of the industry because of scale effects.

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  • Corporate Authors:

    Southern Methodist University

    School of Law
    Dallas, TX  USA  75222
  • Authors:
    • White, L J
  • Publication Date: 1979

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Filing Info

  • Accession Number: 00195747
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jul 31 1979 12:00AM