Airport Privatization and Regulation: Effects on Airport Charge, Capacity, and Social Welfare

Yukihiro Kidokoro () and Anming Zhang ()
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Yukihiro Kidokoro: National Graduate Institute for Policy Studies
Anming Zhang: University of British Columbia

Chapter Chapter 6 in Economic Regulation of Urban and Regional Airports, 2023, pp 125-169 from Springer

Abstract: Abstract This paper examines airport privatization and various forms of airport regulation, taking into account of behavior of public administration and non-aeronautical service of an airport. First, we find that the regulator may set the price of non-aeronautical service lower than its marginal cost in order to counteract a high airport charge, if it can regulate non-aeronautical service. Second, price-cap regulation on aeronautical service could reduce airport charge, but also introduce an underinvestment in airport capacity that could lower social welfare. Whether price-cap or cost-based regulation is superior depends on the relative importance of the underinvestment effect under price-cap regulation, versus a regulatory waste associated with cost-based regulation.

Keywords: Airport privatization; Price-cap regulation; Cost-based regulation; Aeronautical service; Non-aeronautical service; Regulator behavior; Capacity investment; Single-till regulation; Dual-till regulation; Social welfare; Public Airport; Market distortion; Regulatory waste; Airline competition; Competition among non-aeronautical service providers (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:adspcp:978-3-031-20341-1_6

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DOI: 10.1007/978-3-031-20341-1_6

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