Congestion Pricing, Slot Sales and Slot Trading in Aviation

Erik Verhoef

No 08-030/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper studies the regulation of an airline duopoly on a congested airport. Regulation should then address two market failures: uninternalized congestion, and overpricing due to market power. We find that first-best charges are differentiated over airlines if asymmetric, and completely drive out the least efficient airline from the market. This is not generally the case for an undifferentiated charge, which is found to be a weighted average of first-best charge rules for the two airlines, and is less-than-optimally efficient because of its inability to differentiate between them. Tradeable slots may yield the first-best outcome if the congestion externality is relatively important and the market power distortion relatively unimportant, but may be less efficient than non-intervention when the reverse is true.

Keywords: Airport congestion; congestion pricing; slot trading; tradeable permits; second-best (search for similar items in EconPapers)
JEL-codes: D62 R41 R48 (search for similar items in EconPapers)
Date: 2008-03-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Congestion pricing, slot sales and slot trading in aviation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20080030

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