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> For air travel is far from a free market. Indeed. > And one seat is pretty much like another — as economists say, there is little product differentiation —
by clarkmoody 10y ago
> For air travel is far from a free market.
Indeed.
> And one seat is pretty much like another — as economists say, there is little product differentiation — so in a competitive free-for-all, everyone goes broke.
False. Perfect competition leads to zero profits, which is not the same a "broke."
> For starters, planes should not be permitted to fly so full.
> Also, we need rules limiting penalties for changing flights.
> The Federal Trade Commission or the Justice Department’s Antitrust Division should take a close look, and if rules like these don’t do the trick, the biggest carriers should be broken up.
> There is a middle ground between an abusive cartel and a ruinous free-for-all in the skies. It’s known as regulated competition.
Author notes the lack of a free market in air travel, prescribes a bunch of additional regulations, then hints that a free market would be "ruinous."
As far as I know, we've never tried free markets in air travel.
- draw_down 10y agoReally dislike this style of commenting.
- pitaj 10y agoThen either flag it, or tell us what you dislike about it.
- logfromblammo 10y agoIt's not even zero profits. It's zero economic profits, meaning that your accounting profit can be positive, without considering the opportunity cost of not investing in other businesses. You make money, just not more money than skipping the hard work part and investing everything you have in a robot-managed index fund. In theory, commoditized industries are ruled by entry and exit of firms, based on how the capital costs and economies of scale affect marginal cost of production. When the political process creates friction for the entry and exit of those firms, you get problems in the commodity markets. You have to allow big companies to fail, and have smaller firms take their place then merge-and-acquire or otherwise destroy each other until the magic optimal size for that industry is reached. I'd probably have all airports auction off 5-year leases for 20% of their terminal gates every year, and base the number of takeoff and landing slots an airline can use per day on the number of gates it currently leases.
- clarkmoody 10y ago> I'd probably have all airports auction off 5-year leases for 20% of their terminal gates every year, and base the number of takeoff and landing slots an airline can use per day on the number of gates it currently leases. Is this a policy proposal or an airport management idea?