The Effect of Price and Entry Regulation on Airline Output, Capacity and Efficiency

This paper develops a model of capacity utilization in an industry where price and entry are regulated. The distinctive feature is that capacity affects waiting time of consumers, and, therefore, influences demand. The result is that capacity utilization, output, and costs are jointly determined as...

Full description

Saved in:
Bibliographic Details
Published inThe Bell journal of economics Vol. 6; no. 1; pp. 327 - 345
Main Author Vany, Arthur S. De
Format Journal Article
LanguageEnglish
Published The RAND Corporation 01.04.1975
SeriesBell Journal of Economics
Online AccessGet more information

Cover

More Information
Summary:This paper develops a model of capacity utilization in an industry where price and entry are regulated. The distinctive feature is that capacity affects waiting time of consumers, and, therefore, influences demand. The result is that capacity utilization, output, and costs are jointly determined as a function of the regulator's policies, the value of time of consumers, and other exogenous variables. The model is estimated with airline data, and estimates of the price elasticity of demand, corrected for induced quality variation, and of the consumer's marginal valuation of capacity are obtained. These are then used to assess the efficiency of airline regulation.
ISSN:0361-915X
2326-3032
DOI:10.2307/3003228