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Airport pricing strategy by hub airports: does the number of local airports matter?

Akio Kawasaki ()
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Akio Kawasaki: Oita University

Asia-Pacific Journal of Regional Science, 2020, vol. 4, issue 3, No 11, 835-857

Abstract: Abstract This study investigates airport pricing policy (uniform or discriminatory pricing) for international and domestic flights. We assume a game in which two countries exist, where each country has a complementary international hub airport and several local airports. In the symmetric setting, we find that uniform pricing (discriminatory pricing) is a unique Nash equilibrium for a small (large) number of local airports and that for an intermediate number of local airports, equilibria emerge when a hub airport adopts uniform pricing (discriminatory pricing) and the other hub airport adopts discriminatory pricing (uniform pricing). Additionally, we show that uniform pricing is socially preferable for both countries.

Keywords: Airport fee competition; Third-degree price discrimination; Uniform pricing; Airline network (search for similar items in EconPapers)
JEL-codes: L11 L13 L93 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s41685-020-00168-2

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