Market Structure, Countervailing Power and Price Discrimination: The Case of Airports

Jonathan Haskel (), Tommaso Valletti and ,
Authors registered in the RePEc Author Service: Alberto Iozzi

No 8280, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study bargained input prices where up and downstream firms can choose alternative vertical partners. We apply our model to airport landing fees where a number of interesting policy questions have arisen. For example, what is the impact of joint ownership of airports? Does airline countervailing power stop airports raising fees? Should airports be prohibited, as an EU directive intends, from charging differential prices to airlines? Our major findings are: (a) an increase in upstream concentration or in the substitutability between airports always increases the landing fee; (b) the effect of countervailing power, via an increase in downstream concentration, typically lowers landing fees, but depends on the competition regime between airlines and whether airports can price discriminate: airline concentration reduces the landing fee when downstream competition is in quantities, but if downstream competition is in prices landing fees fall only where airports cannot discriminate. Furthermore, only in a specific case (Bertrand competition, uniform landing fees and undifferentiated goods) will lower fees pass through to consumers. (c) With Cournot competition, uniform landing fees are always higher than discriminatory fees, while the reverse is true with Bertrand competition.

Keywords: Airlines; Airports; Countervailing power; Landing fees (search for similar items in EconPapers)
JEL-codes: D43 L13 L93 R48 (search for similar items in EconPapers)
Date: 2011-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Market structure, countervailing power and price discrimination: The case of airports (2013)
Working Paper: Market structure, countervailing power and price discrimination: the case of airports (2013)
Working Paper: Market Structure, Countervailing Power and Price Discrimination: The Case of Airports (2010)
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