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Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ
Abstract
There has been a perception that U.S. trunk airlines had an inherent cost advantage over smaller regional airlines because of economies of scale. We have formulated a general model of airline costs, which we estimate by using panel data on large and small airlines. Differences in scale are shown to have no role in explaining higher costs for small airlines. The primary factor explaining cost differences is density of traffic within an airline's network. Also of major importance is the average length of individual flights.
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Citations
Cited by
The Diffusion of Wal-Mart and Economies of Density
(2011) · Econometrica · doi:10.3982/ecta7699 · Cited by 445
Living by the "Golden Rule": Multimarket Contact in the U. S. Airline Industry
Evans, W. N., & Kessides, I. N. (1994) · The Quarterly Journal of Economics · doi:10.2307/2118466 · Cited by 425
Market Conduct in the Airline Industry: An Empirical Investigation
Brander, J. A., & Zhang, A. (1990) · The RAND Journal of Economics · doi:10.2307/2555469 · Cited by 409
Inefficiencies and scale economies of European airport operations
Pels, E., Nijkamp, P., & Rietveld, P. (2003) · Transportation Research Part E: Logistics and Transportation Review · doi:10.1016/s1366-5545(03)00016-4 · Cited by 270
Cost competitiveness of major airlines: An international comparison
Oum, T. H., & Yu, C. (1998) · Transportation Research Part A: Policy and Practice · doi:10.1016/s0965-8564(98)00007-x · Cited by 85
Metadata
- Authors
- Caves, D. W., Christensen, L. R., & Tretheway, M. W.
- Venue
- The RAND Journal of Economics
- Publisher
- Wiley
- Published
- 1984
- Volume
- 15
- Issue
- 4
- Pages
- 471
- ISSN
- 0741-6261 (ISSN-L)
- OpenAlex
- W2143114661
- Cited by
- 743
- References
- 0
- FWCI
- 11.75
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ. https://app.cochat.ai/papers/10.2307/2555519
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- Caves, D. W., Christensen, L. R., & Tretheway, M. W. (1984). Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ. The RAND Journal of Economics. https://doi.org/10.2307/2555519
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
