Publication: Regulation and Incentives in European Aviation
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2006
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The University of Chicago Press
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Abstract
We study the effect of liberalization on costs and competition in the European
airline industry. We construct and estimate a model that includes demand, capacity,
and cost equations. The latter accounts for inefficiency and cost-reducing effort. We
show that failure to account for the choice of effort would lead to biased estimates
of efficiency and competition in the industry. We also find that the last European
Union package of deregulatory measures has led to significant efficiency improvements
and has fostered competition.
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Journal of Law and Economics. 2006, vol.49, nº 1, p. 229-248