GROWING MARKET CONCENTRATION AND CHANGES IN CONSUMER WELFARE - THE CASE OF THE UNITED-STATES COMMERCIAL AIRLINE MARKET

Initial assessments of the economic deregulation of the U.S. airline industry indicated that most consumers gained from the increased competition in the airline market. More recent studies have reached less favorable conclusions. In this study, changes in passenger welfare are determined for 19 U.S. destination cities for the years 1979, 1983, and 1987 on the basis of Hicks' equivalent variation measure, using a counterfactual research design. Particular attention is given to variations in consumer welfare gains/losses depending on (a) the proportion of the change in air fares attributed to deregulation, and (b) the destination airport's classification. The estimates suggest that travelers to large, long-standing hub cities were generally insulated from any large post-1979 welfare changes. Travelers to new hubs experienced substantial welfare declines between 1979 and 1987 - although their post-1983 welfare changes were uniformly positive. Travel to nonhub airports showed the greatest variance, with both the relatively largest welfare gains and the relatively largest losses. © 1990 Kluwer Academic Publishers.