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Effects of asymmetric information on airport congestion management mechanisms

Olivia Aravena, Leonardo J. Basso and Nicolás Figueroa

International Journal of Industrial Organization, 2019, vol. 62, issue C, 4-27

Abstract: We study and compare three different mechanisms for capacity (slot) allocation in a congested airport when airlines have one-dimensional private information: direct allocation of slots, differentiated tolls and slot auctions. With perfect information, direct allocation is a first best policy which can be implemented through Pigouvian taxes or slot auctions; the mechanisms are equivalent in terms of social welfare. With the introduction of asymmetric information this equivalence is lost: direct allocation is always ex-post inefficient and, in some cases, tolls and subsequent quantity delegation is a better alternative social welfare wise. Auctions may be superior or inferior to tolls. We further show that naïve application of Pigouvian tolls is sub-optimal when imperfect information exists.

Keywords: Airport congestion; Pigouvian tolls; Airport slots; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D62 L50 L93 R41 R48 (search for similar items in EconPapers)
Date: 2019
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