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Scale and (quasi) scope economies in airport technology. An application to UK airports

Anna Bottasso (), Maurizio Conti () and Davide Vannoni ()

Transportation Research Part A: Policy and Practice, 2019, vol. 125, issue C, 150-164

Abstract: In this study we consider a sample of the largest UK airports in order to estimate, for the first time for this sector, a multiproduct cost function using a flexible technology that nests most of the specifications commonly employed in the empirical literature. Another novelty of this work is that we provide estimates of quasi- scope economies for the airport industry, defined as the cost advantage for a diversified firm of jointly providing a set of outputs/services with respect to the costs of their provision through a set of firms quasi-specialized in a single production. Our main results suggest the existence of quasi-scope economies that tend to decline with the size of the airport. This finding, coupled with the results of a set of cost complementarity tests, suggest that cost savings mainly arise from the joint provision of services for national and international passengers and, to a lesser extent, to the addition of cargo transport activities. In turn, pairs of outputs that include (a proxy of) commercial revenues seem to be characterized by anti-cost complementarities. Finally, global economies of scale seem to be exhausted at about five million passengers.

Keywords: Scope and scale economies; Composite cost function; Airports (search for similar items in EconPapers)
JEL-codes: L93 L23 C3 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Scale and (Quasi) Scope Economies in Airport Technology: an Application to UK Airports (2018) Downloads
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