Pioneering Deregulation in the Airline Industry

Since 1975, the federal government has partially or completely deregulated many industries, including petroleum; airlines, trucking. railroad. stockbroking, long-distance telephone service. banking. communications, the financial sector, and natural gas. Each of these industries has structural characteristics that are favorable ,to competition because their markets are large relative to the efficient size of individual firms. The airline industry provides a dramatic example of the dilemmas of deregulation. Since its creation in the 19305, the Civil Aeronautics Board (CAB) viewed its role as deterring competition. No major new air carriers were allowed to enter the interstate market from 1938 to 1978 When innovative low-cost and, no-frills airfares were proposed. the CAB slapped these proposals down. The CAB was (as the interest-group view of regulation predicted) devoted to keeping airfares lip. not down.

The success of airline deregulation encouraged economists and non economists around the world to trust an un regulated market to. make allocation decision, even in industries where firms have the for significant market power

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