Modelling and Testing the Effect of Market Structure on Price: The Case of International Air transport

Modelling and Testing the Effect of Market Structure on Price: The Case of International Air transport

A model is developed to test for the effect on international airline prices of a number of market structure variables, most importantly the US liberal bilateral policy implemented in 1978. The results indicate that liberal bilateral agreements reduce discount fares but not full fares. This implies that holiday-makers and other discretionary travellers are the prime beneficiaries from a liberal bilateral policy.

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