The competitive consequences of hub dominance: A case study

Hub-and-spoke has become the predominant configuration of airline routes, with individual hubs typically dominated by single carriers. These operations have characteristics of natural monopoly; but dominance is a consequence also of advantages that cannot be subsumed under the rubric of superior efficiency. The carrier with the strongest presence attracts a grossly disproportionate amount of traffic and, secondarily, of the high fare-paying traffic originating at the hub. While the welfare consequences of the consequent price discrimination are ambiguous, United's acquisition of 50 additional slots at the slot-constrained O'Hare airport raised a legitimate Clayton Act Section 7 issue.Robert Julius Thorne Professor of Political Economy, Emeritus, Cornell University; Special Consultant, National Economic Research Associates, Inc. I acknowledge with gratitude the indispensable assistance of Gary J. Dorman in assembling the data presented here and offering criticisms, and of Scott Thomas. They bear no necessary responsibility, however, for the article itself.