Airport Competition in Two-sided Markets

Xi Wan () and Benteng Zou
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Xi Wan: Nanjing Audit University, China

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: (To consult this DP, please send an e-mail to dem@uni.lu) This paper examines the importance of commercial revenue on optimal airport charges in Hotelling type duopoly airports under a two-sided market framework with two complementary services-concession and aeronautical operations. Each airport sets commercial and landing charges and serves a single airline. The airport- airline bundle competes for leisure and business passengers. The setting of landing charges under different regulatory regimes is investigated. We demonstrate that in the leisure travel market, which ignores schedule delay cost, the optimal landing fee is invariant to the regulatory scheme, and concession revenue is determined by an airports home market size. In the business travel market, the optimal landing charge is smaller if concession revenue is included in setting the landing fee than if it is not included. In the former case, increasing passenger volume does not guarantee increases in airports’ aeronautical revenue, and a negative impact may exist if the weight of concession profit out of total profit is small.

Keywords: Airport competition; airport regulation; two-sided markets; landing fee; commercial charge. (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 L93 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-com, nep-ind, nep-reg, 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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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:20-01

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