Market Forces and Commercial Aircraft Safety

Andrew Chalk

Journal of Industrial Economics, 1987, vol. 36, issue 1, 61-81

Abstract: This paper investigates the wealth impact on aircraft manufacturers of crashes involving their aircraft. The author attempts to separate out the regulatory, tort law, and endogenous market components of these costs using stock market data. The results indicate that on average the manufacturer suffers a wealth loss of $21.3 million as the result of a fatal crash in which the structural integrity of the aircraft is at issue. The analysis suggests that not all of this amount can be attributed to regulatory or tort law mechanisms, and that market forces play a role in providing air travel safety. Copyright 1987 by Blackwell Publishing Ltd.

Date: 1987
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