MICROECONOMIC THEORY AND APPLICATIONS

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Coursework
Your report must not exceed 2,000 words ( + or – 10%, excluding references)
ASSESSMENT TASK: Who benefits from the airline industry consolidation?
REPORT CONTENT (Your report should cover the following topics):
1. General environment: Summarise the recent background in the performance of the airline industry, with reference to the impact of low cost operators on the market. (Max 500 words)
2. Air travel demand and supply: Analyse the drivers of air travel demand and discuss how elasticities depend on different categories of passengers (business / leisure). Analyse the structure of costs, economies of scale within the sector and discuss pricing strategies. (Max 500 words)
3. Market structure and competition policy: Assess the concentration of the sector. Discuss the regulation / deregulation of the airline industry and try to identify what should regulator consider when deciding on mergers in the industry (Max 500 words)
4. You have to write an introduction, conclusion which synthesise you findings and a bibliography (Max 500 words)
ASSESSMENT CRITERIA: Marks will be allocated as follows:
1. Background to market 25 marks
2. Air travel demand and supply 25 marks
3. Market structure and competition policy 25 marks
4. Presentation/Writing/Layout/Proper referencing 25 marks
INDICATIVE READING:
• FRBSF Economic Letter, 2002,Competition and Regulation in the Airline Industry (available on Blackboard)
• IATA Economics Briefing, No 5, Airline Cost Performance (available on Blackboard)
You will need to do your own research, especially using web-based materials, other textbooks and journal articles. Proper referencing of all materials used for working on the report is essential.
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