The CAB's Domestic Passenger Fare Investigation

Abstract

For the second time in its 35-year history, the CAB has undertaken a general, in-depth investigation of airline pricing policies. This Domestic Passenger Fare Investigation is described below, primarily from the standpoint of the presentations made by the U.S. Department of Transportation, for whom the authors served as expert witnesses. The investigation is important in two specific respects: first, it marks what could prove to be a significant and possibly enlightened change in CAB regulatory policy; and second, the analysis presented in the case should be applicable to a broad range of quasi-competitive industries subject to economic regulation. But while the decisions rendered in the investigation form grounds for optimism, recent Board actions raise severe questions about the permanency of this new policy direction.