Tuesday, September 26, 2006

U.S. Relaxes Air Travel Restrictions

The U.S. ban on liquids and gels in carry-on bags has been modified.

U.S. Relaxes Air Travel Restrictions
NY Times
By JOHN HOLUSHA

Air travelers will be allowed to carry drinks bought at the airport onto planes and to have small amounts of liquids and gels in their carry-on bags, the Department of Homeland Security said today.

The new rules, which will go into effect Tuesday, allow travelers to carry liquids, gels or aerosols in containers of 3 ounces or less, as long as they all fit into a clear 1-quart plastic bag that can be screened at the security checkpoint. Drinks and other items purchased in the secure part of the airport, beyond the checkpoint, will also be allowed onto planes...

The decision slightly relaxes a broad ban on liquids and gels in carry-on bags. The ban was imposed last month after British officials arrested a group of people who they said were planning to bomb airplanes flying to the United States, using liquids combined on board to form explosives...
Security issues aside, what are the economic consequences of this change in policy? We should expect the retailers beyond the security checkpoint to benefit. Demand for drinks will increase and so will demand for carry-on hygienic products, causing prices and profits to increase. These benefits will be short-lived however. The property owners will charge a higher rent for the retail space as soon as contractually possible. When analyzing a change in the economic environment, a general rule is that the owner of the scarce resource is the one that benefits. Since the scarce resource is the retail space, not the retail know-how, we should expect the owners of the property to benefit exclusively in the long run from the policy change.

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