William Dickens wrote:
>
> >This doesn't seem consistent with the usual story that big airlines want
> >slots allocated by competitive bidding, while small airlines don't. If
> >the slots are the source of the monopoly power, competitive bidding
> >would lead to full dissipation of the rents, no?
>
> Not at all. The network economies mean that the slots are a lot more valuable to an
>established airline, and the differences in the extent to which airlines depend on
>existing cities as hubs means that the value to one airline is going to be greater
>than any of the others and so it will not lose all its rents to bidding.
Fair enough, though in the long-run your story is pretty superficial.
The possibility of earning rents if an airport becomes another hub just
intensifies competition at the "competition *for* the hub" stage of the
game.
> But that misses the main point. Big airlines want competitive bidding for _new_
>slots, not existing ones. This will allow them to maintain the value of their
>existing slots by strategically out-bidding potential competitors. At least that is
>my understanding of their motivations. --
So it's basically predation? Any evidence the big airlines are losing
money on the marginal slots they win bids for?
--
Prof. Bryan Caplan
Department of Economics George Mason University
http://www.bcaplan.com [EMAIL PROTECTED]
"[T]he power of instruction is seldom of much efficacy, except in
those happy dispositions where it is almost superfluous."
-- Edward Gibbon, *The Decline and Fall of the Roman Empire*
