Quantity,quality and the welfare effects of US airline deregulation |
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| Authors: | Martin Gaynor John M. Trapani III |
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| Affiliation: | 1. Department of Economics , Johns Hopkins University , Baltimore , Maryland , 21218 , USA;2. Tulane University New Orleans , Louisiana , 70118-5669 , USA |
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| Abstract: | In this paper we employ a method for estimationg quality-adjusted demand to calculate measures of the change in consumer suruplus due to US airline deregulation. The quality-adjusted estimates of the price elasticity of demand indicate that consumers are from 25% to 50% more sensitive to changes in air fares than unadjusted estimates would suggest. Changes in unadjusted consumer surplus overstate the net welfare gains from deregulation by roughly a factor of two, strongly suggesting that adjustments for quallity of service are essential to welfare analysis of regulatory changes in this industry |
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