EVIDENCE OF CHANGING CONTESTABILITY IN COMMERCIAL AIRLINE MARKETS DURING THE 1980S

In recent years, rising market concentration has been cited as an indi cator of deregulation-induced troubles within the U.S. commercial airl ine industry. In this paper, a contestable market framework is used to examine whether changes in market concentration increased airfares in 19 different destination markets at three different points in time. T he empirical analyses indicate that concentration measures gained in i mportance in setting airfares during the 1980s suggesting that market contestability may have declined. The estimates also show that the dem and for air travel, on average, became more own-price elastic over the 1980s for the 19 destination cities analyzed.