The empirical work analyzes the effects of actual competitors only. Theoretically, airline markets
could be contestable if sunk costs are low enough – thus, potential entrants would discipline
monopolists to provide better on-time service. Though contestability was an early motivation for
deregulating the airline industry, subsequent analyses (e.g., Morrison and Winston, 1987; Peteraf,
1994) have found empirical evidence incompatible with contestability in terms of fares. To the extent
that the results for quality are similar, this paper may provide further evidence that the airline industry
is not contestable.