But what everyone missed had been there all the time. For a number of years prior to deregulation, Delta had convinced most passengers in the Southeast that even if you wanted to get to heaven, you first had to change planes at Atlanta. It took a while for the network economies of hub and spoke systems to spread throughout the industry, but by the late 1980 s this had become the norm. The result is market contestability not because of new or potential entry but because of alternative hub routings. The second lesson is that you can be wrong for the right reasons, i.e. , the law of unintended consequences.
Average fares are lower, but they also are highly discriminatory.
One of the basic purposes of economic regulation, the prevention of discrimination, has been abandoned, completely and without much forethought. Indeed, the ability of airlines to discriminate by time of purchase, conditions of travel and, significantly, the degree of competition faced in each city-pair market, has been both the major impetus for lower average fares and the major source of most complaints about deregulation. As strange as it may seem, another unintended consequence of airline deregulation has been its popular success. In the 1970 s, the airline industry was considered mature. As a result, most economists underestimated demand elasticity and the resulting growth that would be produced by lower prices.