A comment on W. Wei and M. Hansen's benefit estimation in "An aggregate demand model for air passenger traffic in the hub-and-spoke network"

Michel Beuthe

Transportation Research Part A: Policy and Practice, 2009, vol. 43, issue 2, 230-234

Abstract: This comment analyzes the demand model and method used by W. Wei and M. Hansen for computing the benefits of an airport capacity extension. The log-linear specification and coefficients of the demand function imply that the airport extension's positive effect on demand decreases with the volume of traffic and associated congestion. If this unlikely result is accepted, the surplus method used by Wei and Hansen underestimates the users' investment benefit. The note argues that the marginal willingness to pay for a capacity extension should rather increase with congestion. If this is the case, the method used by Wei and Hansen could actually overestimates the benefit. A better specification would rather allow for a function concave to the origin in order to account for capacity constraints, and also set a maximum finite price. Above all, a fair evaluation of the users' benefit should be based on a function which explicitly includes a variable, or function of variables, that permits an estimation of the users' cost of congestion.

Keywords: Consumer; surplus; Investment; benefits; Airport; capacity (search for similar items in EconPapers)
Date: 2009
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