Abstracts Economics

Essays on domestic and international airline economics with some bootstrap applications

by Anthony Kenneth Postert

We present several essays on topics in airline economics. The first essay presents a model of U.S. aircraft demand. This joint model of demand for and supply of commercial air service allow us to simulate the effects of emerging technologies in engine design capabilities and in aircraft capacities on airline fleet sizes. The second essay examines the possibility that relatively high prices in the European airline industry are due to market power. We examine the market conduct of firms in the European airline industry and find little evidence that competitive pricing is violated on average. In the third essay, we present an integrated model of world aircraft demand. We estimate the demand for both passenger and cargo services and tie this demand to cost analysis of the carriers. Our cost model is used to generate derived demand schedules for the factors of production, in particular flying capital. We take a brief look at bootstrap techniques in the forth essay. Bootstrapping has become a powerful technique for estimating sampling distributions of statistics since its introduction by Efron (1979). We discuss the bootstrapping procedure and present some small sample evidence of its effectiveness through Monte Carlo experiments. The fifth essay applies the bootstrap to a model of U.S. aircraft demand. We bootstrap confidence intervals for Allen-Uzawa partial elasticities of substitution and price elasticities. We find prediction intervals for forecasts of airline's fleet size using the bootstrap. The sixth essay suggests an application of leapfrogging measures to the airline industry. A detailed look at Hultberg and Postert (1998) is presented. Three rank mobility measures are presented and used to determine the amount of leapfrogging in the data. A human capital augmented Solow-Swan model is fit to the data and we use bootstrapping to calibrate the model.