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The remains of regulation: airlines' profits after liberalization

Author

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  • Marin, Pedro L.

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

  • Marin, Pedro L., 1995. "The remains of regulation: airlines' profits after liberalization," LSE Research Online Documents on Economics 6774, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:6774
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    File URL: http://eprints.lse.ac.uk/6774/
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    More about this item

    Keywords

    Airlines; profits; entry; deregulation;
    All these keywords.

    JEL classification:

    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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