Market Structure, Countervailing Power and Price Discrimination: The Case of Airports

Jonathan Haskel (), Alberto Iozzi and Tommaso Valletti

No 177, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We study bargained input prices where up and downstream firms can choose alternative vertical partners. We apply our model to bargained airport landing fees where a number of interesting policy questions have arisen. For example, what is the impact of joint ownership of airports? Does airline countervailing power stop airports raising fees? Should airports be prohibited, as an EU directive intends, from charging differential prices to airlines? Our major findings are (a) an increase in upstream concentration or in the substitutability between airports always increases the landing fee; (b) the effect of countervailing power, via an increase in downstream concentration, depends on the competition regime between airlines and whether airports can price discriminate: airline concentration reduces the landing fee when downstream competition is in quantities, but if downstream competition is in prices only where airports cannot discriminate. Furthermore, only in a specific case (Bertrand competition, uniform landing fees and undifferentiated goods) will lower fees pass through to consumers. (c) With Cournot competition, uniform landing fees are always higher than discriminatory fees, while the reverse is true with Bertrand competition. We also look at the incentives for airport expansion which raise quantities of passengers paying a given landing fee, but alters the nature of airline competition, which changes the landing fee.

Keywords: Airports; airlines; landing fees; countervailing power (search for similar items in EconPapers)
JEL-codes: D43 L13 L93 R48 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-12-09, Revised 2010-12-09
New Economics Papers: this item is included in nep-com, nep-mic and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ceistorvergata.it/RePEc/rpaper/RP177.pdf Main text (application/pdf)

Related works:
Journal Article: Market structure, countervailing power and price discrimination: The case of airports (2013)
Working Paper: Market structure, countervailing power and price discrimination: the case of airports (2013)
Working Paper: Market Structure, Countervailing Power and Price Discrimination: The Case of Airports (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:177

Ordering information: This working paper can be ordered from
CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
https://ceistorvergata.it

Access Statistics for this paper

More papers in CEIS Research Paper from Tor Vergata University, CEIS CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma. Contact information at EDIRC.
Bibliographic data for series maintained by Barbara Piazzi ().