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Deregulation, prices and hubs: review of a seminal paper on the airline industry

Author(s): Natália dos Santos Ferreira

Journal: Journal of Transport Literature
ISSN 2238-1031

Volume: 1;
Issue: 1;
Start page: 105;
Date: 2007;
Original page

Keywords: prices | hubs | dominance | deregulation | air transportation

This paper aims at discussing the seminal article "Hubs and high fares: dominance and market power in the U.S. airline industry" written by Severin Borenstein (1989). The author estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline. Results indicated that an airline's share of passengers on a route and at the endpoint airports are variables that significantly influence market power. As noted by the paper, there is no umbrella effect for smaller carriers stemming from the higher markups of a dominant airline.
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