Airport Congestion Pricing When Airlines Price Discriminate

Achim I. Czerny and Anming Zhang

No 12-02, WHU Working Paper Series - Economics Group from WHU - Otto Beisheim School of Management

Abstract: This paper develops a tractable model of third-degree price discrimination in airline markets that features two types of passengers with different time valuations, carriers in Cournot competition and a congested infrastructure. We find that price discrimination always leads to a loss of social welfare when, in the first stage, the congestion charge is chosen to maximize welfare by incorporating carriers’ behavior in the second stage. We also show that the welfare loss can be small if, in the process of choosing the optimal airport charges, carriers were treated as atomistic.

Keywords: Price discrimination; infrastructure; congestion; Cournot competition; airlines (search for similar items in EconPapers)
JEL-codes: D43 D62 H23 L13 L93 R41 R48 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published Transportation Research Part B: Methodological, Volume 65, July 2014, Pages 77–89

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Persistent link: https://EconPapers.repec.org/RePEc:whu:wpaper:12-02

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