BARRIERS TO ENTRY IN THE AIRLINE INDUSTRY: A MULTIDIMENSIONAL REGRESSION-DISCONTINUITY ANALYSIS OF AIR-21

We investigate the success of legislation aimed at increasing competition at highly concentrated U.S. airports, mainly by forcing these airports to increase the availability of scarce facilities. We use a multidimensional regression-discontinuity approach to exploit a sharp discontinuity in the law&...

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Bibliographic Details
Published in:The review of economics and statistics 2015-12, Vol.97 (5), p.1002-1022
Main Authors: Snider, Connan, Williams, Jonathan W.
Format: Article
Language:English
Subjects:
Air fares
Airports
Federal legislation
Market entry
Quality of service
Studies
United States
Welfare economics
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Summary:We investigate the success of legislation aimed at increasing competition at highly concentrated U.S. airports, mainly by forcing these airports to increase the availability of scarce facilities. We use a multidimensional regression-discontinuity approach to exploit a sharp discontinuity in the law's implementation and identify its effects. We find that fares decrease by 13.4% (20.2%) in markets with one (both) end point(s) covered. Approximately half of the decline is driven by the entry of low-cost carriers. We find little evidence that the fare declines were accompanied by a diminished quality of service, and passenger volumes increased, which suggests the legislation improved consumer welfare.
ISSN:0034-6535
1530-9142
DOI:10.1162/REST_a_00455