This article derives a model of airline services as joint goods. Using this model, the article shows how the existence of higher fares in certain "hub" routes may imply the market has generated a solution to the problem of covering joint costs by having a larger proportion of those costs come from hub routes, rather than the existence of any general market failure. The model is then used to make recommendations for competition policy.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics