Airport concession revenue sharing and entry deterrence

Yushi Tsunoda

Economics of Transportation, 2023, vol. 33, issue C

Abstract: This paper investigates how concession revenue sharing between an airport and an incumbent airline affects the strategic flight frequency choice of that airline for entry deterrence and thus, profits and welfare. Specifically, we construct a model in which the incumbent airline confronts the entry threat of an entrant airline and strategically decides whether to deter or accommodate the entrant airline by choosing its flight frequency. We show that concession revenue sharing between the airport and the incumbent airline may enhance the market power of the incumbent airline, which improves or harms welfare. In addition, concession revenue sharing also diminishes the incentive for the incumbent airline to deter entry, which improves welfare. Our novel results provide important policy implications by determining that the effects of concession revenue sharing depend on the revenue share rate and the airport capacity.

Keywords: Concession revenue; Revenue sharing; Entry deterrence; Airline competition (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S221201222200051X
Full text for ScienceDirect subscribers only

Related works:
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:eee:ecotra:v:33:y:2023:i:c:s221201222200051x

DOI: 10.1016/j.ecotra.2022.100300

Access Statistics for this article

Economics of Transportation is currently edited by Mogens Fosgerau and Erik Verhoef

More articles in Economics of Transportation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().