Airline Consolidation and Consumer Welfare

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.Airline

Rivalry in the U.S. Airline Industry

In this paper, we use Market Share Instability (MSI) as a measure of the intensity of competition among airlines on a specific route. This measure is used to capture not only price competition but also non-price competition notably capacity competition. We test the effect of different variables (used in pricing studies) on MSI on a sample of 400 routes over the period 1987 to 1993. Most of the results found in pricing studies are confirmed using this measure of rivalry. For example the presence of a bankrupt carrier increases rivalry but extensive multimarket contact between rivals decreases competition. We also find that MSI was significantly lower in the early nineties when demand conditions were weak. A decline in the intensity of capacity competition could explain that result.

Rewiring the system: the changing structure of the electric power industry.

In the United States, significant changes have taken place in the structure of electricity markets. Twenty-three states, including Pennsylvania, New Jersey, and Delaware, have changed or will be changing their laws to allow consumers to switch electricity suppliers. In some states, millions of consumers have already switched. What brought about the deregulation of an industry previously considered a "natural monopoly"? In "Rewiring the System: The Changing Structure of the Electric Power Industry," Tim Schiller describes the changes in law and the developments in economic theory that have led to the restructuring of energy markets.Electric utilities