Aggregate airline industry earnings have exhibited large amplitude cyclical behavior since deregulation in 1978. To explore the causes of these cycles we develop a behavioral dynamic model of the airline industry with endogenous capacity expansion, demand, pricing, and other feedbacks; and model several strategies industry actors have employed in efforts to mitigate the cycle. We estimate model parameters by maximum likelihood methods during both partial model tests and full model estimation using Markov chain Monte Carlo methods to establish confidence intervals. Contrary to prior work we find that the delay in aircraft acquisition (the supply line of capacity on order) is not a very influential determinant of the profit cycle. Instead we find that aggressive use of yield management-varying prices to ensure high load factors (capacity utilization)-may have the unintended effect of increasing earnings variance by increasing the sensitivity of profit to changes in demand.
Quantitative public financial management research focused on local governments is limited by the absence of a common database for empirical analysis. While the U.S. Census Bureau distributes government finance data that some scholars have utilized, the arduous process of collecting, interpreting, and organizing the data has led its adoption to be prohibitive and inconsistent. In this article we offer a single, coherent resource that contains all of the government financial data from 1967-2012, uses easy to understand natural-language variable names, and will be extended when new data is available.
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