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The Remains of Regulation: Airlines Profits After Liberalization

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  • Pedro L Marin

Abstract

This paper develops an empirical model of entry to analyze the effect of previous regulation on European airlines? post-liberalization profits. The author distinguishes between European flag carriers, which are hightly regulated at the beginning of the eighties, and independent airlines. It is found that the latter enjoy sunk cost advantages but get lower variable profits than the former. This means that possible efficiency disadvantages suffered by the flag carriers are more than offset by their higher perceived quality, leading to a situation in which they are less likely to enter a route, but also less likely to exit.

Suggested Citation

  • Pedro L Marin, 1995. "The Remains of Regulation: Airlines Profits After Liberalization," STICERD - Economics of Industry Papers 12, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:12
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    File URL: https://sticerd.lse.ac.uk/dps/ei/ei12.pdf
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    References listed on IDEAS

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    1. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
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