A theory of transportation clubs with special application to the domestic aviation system

Michael Aaron Lipsman

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This dissertation employs the theory of clubs and the theory of multi-product enterprises to develop a set of three general transportation pricing and investment models. These models incorporate costs related to operating and maintaining transportation facilities, the capital investment required to provide such facilities, the congestion that arises from use of these facilities, and the adverse impacts and benefits associated with external impacts imposed on or provided to individuals who do not directly use the facilities. The models are presented in both a one-period and two-period context. In additional, the models address the sharing of transportation facilities by more than one group of users;Among the principal findings derived from these models are a set of conditions which relate the cost characteristics of tranportation facilities to requirements for the optimal pricing of facility use. For example, in the absence of non-user externalities, for transportation facilities which are shared by multiple user groups and which experience different levels of use over time, it was determined that a cost structure characterized by constant ray economies of scale and the absence of scope economies is required for the provision and operation of the facility to be fully and efficiently funded through user fees;To test the extent to which the general models can be applied to real world situations, an airport club model which explicitly takes into consideration sharing of the facility by different types of transportation vehicles, which reflect differences in user preferences, was developed. Optimal pricing rules were developed for this model and tested using a sample of financial and operation data from large tower controlled U.S. airports. The empirical analysis found that ray economies of scale vary by size of airport. However, due to the discovery of a "crowding out" effect between commercial and non-commercial aircraft, no definitive findings regarding economies of scope were obtained.

Date: 1994-01-01
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