Airport capacity and congestion pricing with both aeronautical and commercial operations

Anming Zhang and Yimin Zhang

Transportation Research Part B: Methodological, 2010, vol. 44, issue 3, 404-413

Abstract: In this paper, we study airport decisions on pricing and capacity investment with both aeronautical and concession operations. In addition, the airport under consideration is serving air carriers who have market power. We find that a profit-maximizing airport would over-invest in capacity in the sense that the marginal (social) benefit of capacity is smaller than the marginal (social) cost. This tendency of overinvestment still holds when the private airport is under the regulatory constraint of cost recovery in its aeronautical operation (the dual-till regulation). We also find that the capacity investment by a public airport will be socially efficient in the sense that the marginal benefit of capacity is equal to the marginal cost of capacity. However, somewhat surprisingly, the capacity investment of the public airport will be inefficient if it is under regulatory constraints. Specifically, the airport will also over-invest in capacity, whether it is under a single-till regulation or a dual-till regulation. Finally, it is noteworthy that the inefficiency in airport investment is driven by the interaction between the airport and the carriers who have market power.

Keywords: Airport; charges; Capacity; investment; financing; Commercial; revenue; Regulation; Market; power (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0191-2615(09)00113-1
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:transb:v:44:y:2010:i:3:p:404-413

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

Access Statistics for this article

Transportation Research Part B: Methodological is currently edited by Fred Mannering

More articles in Transportation Research Part B: Methodological from Elsevier
Bibliographic data for series maintained by Catherine Liu ().