IDEAS home Printed from https://ideas.repec.org/a/bla/ecorec/v66y1990i4p308-321.html
   My bibliography  Save this article

Costs under Regulation and Deregulation: The Case of US Passenger Airlines

Author

Listed:
  • JOHN P. FORMBY
  • PAUL D. THISTLE
  • JAMES P. KEELER

Abstract

Privatization, the removal of regulatory control and similar changes in property rights within firms can be expected to shift cost functions downward and permit increased output, lower final service prices and more efficient resource allocation The US Airline Deregulation Act of 1978 was clearly expected to have these effects. This paper investigates whether the widely anticipated reduction in costs following the Airline Deregulation Act of 1978 actually occurred. We utilize an empirical procedure that explicitly takes the multi‐product characteristics into account and identifies the various sources of changes in costs. The change in airline's costs are decomposed into components and separately measured to identify the effects attributable to deregulation A number of other countries are now considering important changes in the public ownership and control of their airline industries and a quantitative assessment of the actual effect of US deregulation on costs may be thought of as providing lower bound estimates of what might be expected in other countries.

Suggested Citation

  • John P. Formby & Paul D. Thistle & James P. Keeler, 1990. "Costs under Regulation and Deregulation: The Case of US Passenger Airlines," The Economic Record, The Economic Society of Australia, vol. 66(4), pages 308-321, December.
    • Handle: RePEc:bla:ecorec:v:66:y:1990:i:4:p:308-321
    DOI: 10.1111/j.1475-4932.1990.tb01736.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-4932.1990.tb01736.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-4932.1990.tb01736.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lazar, Fred, 1989. "Airline Deregulation: A Footnote on the Missing Entrants," Australian Economic Papers, Wiley Blackwell, vol. 28(53), pages 246-252, December.
    2. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1983. "Productivity Performance of U.S. Trunk and Local Service Airlines in the Era of Deregulation," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 312-324, July.
    3. Robert W. Crandall, 1986. "Economic Rents as a Barrier to Deregulation," Cato Journal, Cato Journal, Cato Institute, vol. 6(1), pages 173-194, Spring/Su.
    4. repec:bla:ecorec:v:61:y:1985:i:173:p:535-39 is not listed on IDEAS
    5. Douglas, George W & Miller, James C, III, 1974. "Quality Competition, Industry Equilibrium, and Efficiency in the Price-Constrained Airline Market," American Economic Review, American Economic Association, vol. 64(4), pages 657-669, September.
    6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    7. repec:bla:ecorec:v:65:y:1989:i:188:p:32-50 is not listed on IDEAS
    8. repec:bla:ecorec:v:56:y:1980:i:153:p:186-89 is not listed on IDEAS
    9. Richard A. Posner, 1975. "The Social Costs of Monopoly and Regulation," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 45-65, Springer.
    10. P. J. Forsyth & R. D. Hocking, 1980. "Property Rights and Efficiency in a Regulated Environment:The Case of Australian Airlines," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 182-185, June.
    11. D. G. Davies, 1980. "Property Rights and Efficiency in a Regulated Environment:Reply," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 186-189, June.
    12. David R. Graham & Daniel P. Kaplan & David S. Sibley, 1983. "Efficiency and Competition in the Airline Industry," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 118-138, Spring.
    13. Robert D. Tollison, 1982. "Rent Seeking: A Survey," Kyklos, Wiley Blackwell, vol. 35(4), pages 575-602, November.
    14. Davies, David G, 1971. "The Efficiency of Public versus Private Firms, The Case of Australia's Two Airlines," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 149-165, April.
    15. repec:bla:ecorec:v:56:y:1980:i:153:p:182-85 is not listed on IDEAS
    16. Davies, David G, 1977. "Property Rights and Economic Efficiency-The Australian Airlines Revisited," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 223-226, April.
    17. Michael G. Kirby & Robert P. Albon, 1985. "Property Rights, Regulation and Efficiency: A Further Comment on Australia's Two‐Airline Policy," The Economic Record, The Economic Society of Australia, vol. 61(2), pages 535-539, June.
    18. Theodore E. Keeler, 1972. "Airline Regulation and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 399-424, Autumn.
    19. Michael A. Brooks & Ben J. Heudra, 1989. "An Exploration of Rent Seeking," The Economic Record, The Economic Society of Australia, vol. 65(1), pages 32-50, March.
    20. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter.
    21. Denny, Michael & Fuss, Melvyn A, 1977. "The Use of Approximation Analysis to Test for Separability and the Existence of Consistent Aggregates," American Economic Review, American Economic Association, vol. 67(3), pages 404-418, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Johnston, Ahren & Ozment, John, 2013. "Economies of scale in the US airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 51(C), pages 95-108.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Severin Borenstein & Nancy L. Rose, 2007. "How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry," NBER Working Papers 13452, National Bureau of Economic Research, Inc.
    2. Michael G. Kirby & Robert P. Albon, 1985. "Property Rights, Regulation and Efficiency: A Further Comment on Australia's Two‐Airline Policy," The Economic Record, The Economic Society of Australia, vol. 61(2), pages 535-539, June.
    3. Simon Domberger & John Piggott, 1986. "Privatization Policies and Public Enterprise: A Survey," The Economic Record, The Economic Society of Australia, vol. 62(2), pages 145-162, June.
    4. repec:elg:eechap:15325_11 is not listed on IDEAS
    5. Douglas Davis & Robert Reilly, 1998. "Do too many cooks always spoil the stew? An experimental analysis of rent-seeking and the role of a strategic buyer," Public Choice, Springer, vol. 95(1), pages 89-115, April.
    6. Giuseppe Dari-Mattiacci & Eric Langlais & Bruno Lovat & Francesco Parisi, 2007. "Crowding-out in productive and redistributive rent-seeking," Public Choice, Springer, vol. 133(1), pages 199-229, October.
    7. Peter Hartley & Chris Trengove, 1990. "East‐West Airlines' Sydney‐Melbourne Service: Market Expansion or Demand Diversion?," The Economic Record, The Economic Society of Australia, vol. 66(3), pages 203-220, September.
    8. Hwan Baik, Kyung & Lee, Sanghack, 1997. "Collective rent seeking with endogenous group sizes," European Journal of Political Economy, Elsevier, vol. 13(1), pages 121-130, February.
    9. Amihai Glazer, 2008. "Crowding Out Wasteful Activities by Wasteful Activities," Working Papers 080908, University of California-Irvine, Department of Economics.
    10. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, March.
    11. Elie Appelbaum & Eliakim Katz, 1986. "Transfer seeking and avoidance: On the full social costs of rent seeking," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 391-397, Springer.
    12. Maria Arbatskaya & Hugo Mialon, 2010. "Multi-activity contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(1), pages 23-43, April.
    13. Jay S. Coggins, 1995. "Rent Dissipation And The Social Cost Of Price Policy," Economics and Politics, Wiley Blackwell, vol. 7(2), pages 147-166, July.
    14. Amihai Glazer & Stef Proost, 2010. "Reducing Rent Seeking by Providing Wide Public Service," Working Papers 101106, University of California-Irvine, Department of Economics.
    15. Coggins, Jay S., 1992. "Rent Dissipation and the Social Cost of Price Policy," Staff Papers 200551, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    16. Glazer, Amihai & Konrad, Kai A., 1999. "Taxation of rent-seeking activities," Journal of Public Economics, Elsevier, vol. 72(1), pages 61-72, April.
    17. Jong-Hun Park & Anming Zhang, 2000. "An Empirical Analysis of Global Airline Alliances: Cases in North Atlantic Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 16(4), pages 367-384, June.
    18. Mahmudul Anam & Eliakim Katz, 1988. "Rent-seeking and second best economics," Public Choice, Springer, vol. 59(3), pages 215-224, December.
    19. Tyler Cowen & Amihai Glazer & Henry McMillan, 1994. "Rent Seeking Can Promote The Provision Of Public Goods," Economics and Politics, Wiley Blackwell, vol. 6(2), pages 131-145, July.
    20. Joseph Jadlow, 1985. "Monopoly rent seeking under conditions of uncertainty," Public Choice, Springer, vol. 45(1), pages 73-87, January.
    21. Manuela, Wilfred Jr., 2007. "Airline liberalization effects on fare: The case of the Philippines," Journal of Business Research, Elsevier, vol. 60(2), pages 161-167, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecorec:v:66:y:1990:i:4:p:308-321. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/esausea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.