Airport cities and multiproduct pricing

Tiziana D'Alfonso (), Valentina Bracaglia () and Yulai Wan ()
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Tiziana D'Alfonso: Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy
Valentina Bracaglia: Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy
Yulai Wan: Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

No 2015-14, DIAG Technical Reports from Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"

Abstract: We study multiproduct pricing of core and side goods in the case of a (monopoly) airport city. The consumption of the side services is not conditional on the consumption of the core service, i.e., travellers as well as non-travellers may demand side goods but derive different benefits. We obtain several results in two different settings. The first one depicts the case in which individuals make decisions about buying core and side goods independently. In this case, non-traveller demand induces the facility to increase the core price with respect to the case in which only travellers may purchase side services. In the second one, individuals make decisions simultaneously, depending on their degree of foresight over the surplus that they anticipate to obtain from the consumption of side goods. In this case, the non-passenger demand might incentivizes the transport facility to charge lower core price, with respect to the case in which only travellers may purchase side services. Manipulating the side products mix in order to enrich the shopping experience of travellers (i.e., to increase the benefit that they derive from the joint consumption of core and side goods) may be welfare-enhancing. Traveller surplus would certainly increase, but such positive effects occur to the detriment of non-travellers, who find themselves to pay a higher price for side products, whatever is the level of consumer foresight.

Keywords: monopoly; multiproduct pricing; complementarity effect; demand effect; hierarchical demands; airport city (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-mkt, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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