tag:blogger.com,1999:blog-2830084253401570472.post5060481619458192469..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: Blaming deregulationEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2830084253401570472.post-39509061684086090042012-04-27T10:32:32.560+12:002012-04-27T10:32:32.560+12:00The plausible market failure argument on American ...The plausible market failure argument on American air travel is subadditivity and network effects. Essentially, the value of the network is greater when the high traffic routes cross-subsidize the low-traffic routes, but any deregulated system will have new entrants poach the higher margin routes so there's no potential cross-subsidy to the lower volume routes and the value of the entire network is diminished. This is belied by that cabotage seems to make things cheaper in New Zealand, not more expensive.Eric Cramptonhttps://www.blogger.com/profile/15831696523324469713noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-12117669885103749022012-04-27T10:22:22.476+12:002012-04-27T10:22:22.476+12:00I'm trying to figure out what the authors'...I'm trying to figure out what the authors' market failure argument is. Although they make a few claims of market power and natural monopolies, it seems to be mostly based on claims of positive externalities of air travel. It's possible, but they don't really flesh it out beyond noting that the rise in air fares has possibly contributed to the decline of some cities. But is that a market failure? Maybe not, any more so than anything declining after it fails to be subsidised is. If I build a city accessible only by helicopter, its failure after helicopter subsidies were removed is more an indication of the fact that such an inaccessible city is inefficient.Henry Askinhttp://danieltarmac.blogspot.comnoreply@blogger.com