Published online by Cambridge University Press: 07 October 2011
Since airline deregulation began in 1978, there have been many changes in fares, services, and markets. Moreover, in the relatively brief time since deregulation occurred, economists have undertaken several extensive studies of the effects of airline deregulation. These studies have concerned themselves with fares, route structures, services offered between different types of cities and city pairs, entry of new firms, and other topics. Most of the economic studies of deregulation have arrived at very favorable conclusions – deregulation has, by most economists' measures, improved the functioning of airline markets.
Yet some important questions remain. Long before airline deregulation occurred, some of its strongest advocates predicted benefits from it in the form of substantial unrestricted fare reductions on high-density routes (see especially Keeler 1972, 1978, but also Jordan, 1970). While there is plenty of evidence of restricted fare cuts, the existence of such unrestricted cuts has yet to be documented in much detail. Second, there remains considerable controversy about whether the changes in fares and services occurring immediately after deregulation represent permanent or transitory changes. Third, and closely connected to the first two questions, is an issue of more general economic interest: How does the behavior of airline firms and markets during deregulation relate to the economic theory of market behavior?
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