Heterogeneous price effects and increased price dispersion from quantity‐based congestion management

Sunhyung Lee, Zexuan Liu and Haojun Yu

Economic Inquiry, 2021, vol. 59, issue 3, 1378-1402

Abstract: We examine the effects of quantity‐based approaches to airport congestion management such as slot restrictions on price dispersion and on‐time performance. From the evidence at Newark Liberty International Airport, we find that slot restrictions increase price dispersion and improve on‐time performance. Price dispersion originates from heterogeneous price effects, as ticket prices for high‐value passengers increase more than that for low‐value passengers. Our novel finding is that the share of passengers who have purchased tickets at a top‐end price increase despite the price hike. We use various empirical specifications and an analysis on leads and lags of the policy for robustness.

Date: 2021
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