Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion

Hugo E. Silva, Erik Verhoef and Vincent van den Berg

Journal of Urban Economics, 2014, vol. 80, issue C, 13-27

Abstract: This paper analyzes efficient pricing at a congested airport dominated by a single firm. Unlike much of the previous literature, we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers. We show that a Stackelberg leader interacting with a competitive fringe partially internalizes congestion, and that there are various toll regimes that induce the welfare maximizing outcome, widening the set of choices for regulators. In particular, charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization, to both the leader and the fringe, yields the first-best outcome.

Keywords: Airport pricing; Congestion; Bottleneck model (search for similar items in EconPapers)
JEL-codes: D62 H21 H23 L93 R48 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:80:y:2014:i:c:p:13-27

DOI: 10.1016/j.jue.2013.08.002

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