THE DEMAND FOR AIR TRAVEL: A REGRESSION STUDY OF TIME-SERIES AND CROSS-SECTIONAL DATA IN THE U.S. DOMESTIC MARKET

Abstract

THE ELASTICITY OF DEMAND FOR AIR TRAVEL IS STATISTICALLY ANALYZED BY MULTIPLE REGRESSION APPLIED TO THE AVAILABLE DATA IN TWO WAYS: BY ANALYSIS OF TIME SERIES, AND BY ANALYSIS OF CROSS-SECTION DATA FOR CITY-PAIR MARKETS. RESULTS CONFIRM THE HYPOTHESIS THAT FARE ELASTICITIES ARE LOW OR INSIGNIFICANT IN THE SHORTEST DISTANCE GROUPS, THOUGH LENGTHENING THE INTERVAL FROM 300 TO 500 MILES CHANGES THE PICTURE A GREAT DEAL. IN THE MIDDLE GROUP UP TO 1,000, 100 MILES, FARE ELASTICITIES ARE HIGH AND THEN DECLINE TO INSIGNIFICANCE AT THE LONGEST DISTANCES. ELASTICITIES IN RESPECT TO JOURNEY TIME APPEAR TO INCREASE (NUMERICALLY) FAIRLY STEADILY AS LENGTH OF TRIP INCREASES.

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