Airline Consolidation and Consumer Welfare

Elizabeth Bailey and Dong Liu
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Dong Liu: International Finance Corporation, World Bank Group

Eastern Economic Journal, 1995, vol. 21, issue 4, 463-476

Abstract: In our model of the deregulated airline industry, consumers care not only about price but also about service convenience, measured by system coverage and connection. We find that the service-enhancing effects of employing large-scale hub-and-spoke networks have outweighed the price-increasing effects of having a smaller number of competing national airlines. Thus, a welfare gain has accrued to consumers as a result of the more consolidated market structure. We conclude that public policymakers should exercise antitrust and bankruptcy authority in a manner which does not impede welfare-enhancing consolidations in the airline industry.

Keywords: Airline (search for similar items in EconPapers)
JEL-codes: L93 L98 (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:21:y:1995:i:4:p:463-476

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