Airline Demand Functions in the North Atlantic and their Pricing Implications

Airline Demand Functions in the North Atlantic and their Pricing Implications

The author finds that airline demand is price elastic except for first class. Obstacles to competition and to adjustments of capacity are political rather than economic. He suggests that fares should be based on long-run marginal cost, and reductions should be made only for off-peak travel, density of route, advance payment, and unrestricted group bookings.

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