Recently there was a great episode on the Freakonomics podcast, actually the final episode in a three part series on airline economics. It talks about the histo

Recently there was a great episode on the Freakonomics podcast, actually the final episode in a three part series on airline economics. It talks about the history of airline price regulation and the related economics. https://freakonomics.com/podcast/is-your-plane-ticket-too-expensive-or-too-cheap/ https://freakonomics.com/podcast/is-your-plane-ticket-too-ex... > Back when the industry was regulated by the Civil Aeronautics Board, or C.A.B., airlines were not allowed to lower prices to win customers. So they had to find other ways to compete. > They would compete against each other by adding more flights on the route. Since you couldn’t cut the price, what you would do is say, “We have the most flights.” And that really mattered to business travelers who wanted to be able to, if their meeting ended early, to go to the airport and quickly catch a flight home. So they were competing on frequency, and in other ways in service quality, by offering piano lounges on 747s. And they were gradually driving down the share of seats that were filled by adding more and more flights. And they would eventually get back to the point that they weren’t earning a great rate of return on their investment. So they’d go back to the C.A.B. and they’d say, “We need higher fares.” And the C.A.B. would say, “Yeah, okay, we’ll give you higher fares.” Eventually, in the mid-1970s, people at the C.A.B. figured out that this was just an endless loop, where we were raising fares, and the planes were getting more and more empty, and this was very inefficient. That’s where we had gotten to — pretty empty planes with very high prices.