Airlines' strategic interactions and airport pricing in a dynamic bottleneck model of congestion

H.E. Silva Montalva, E.T. Verhoef, V.A.C. van den Berg

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper analyzes efficient pricing at a congested airport dominated by a single firm. Unlike much of the previous literature, we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers. We show that a Stackelberg leader interacting with a competitive fringe partially internalizes congestion, and that there are various toll regimes that induce the welfare maximizing outcome, widening the set of choices for regulators. In particular, charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization, to both the leader and the fringe, yields the first-best outcome. © 2013 Elsevier Inc.
Original languageEnglish
Pages (from-to)13-27
JournalJournal of Urban Economics
Volume80
DOIs
Publication statusPublished - 2014

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congestion
airport
pricing
leader
internalization
interaction
welfare
regime
firm
Strategic interaction
Airlines
Airports
Pricing
Congestion
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Cite this

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abstract = "This paper analyzes efficient pricing at a congested airport dominated by a single firm. Unlike much of the previous literature, we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers. We show that a Stackelberg leader interacting with a competitive fringe partially internalizes congestion, and that there are various toll regimes that induce the welfare maximizing outcome, widening the set of choices for regulators. In particular, charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization, to both the leader and the fringe, yields the first-best outcome. {\circledC} 2013 Elsevier Inc.",
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Airlines' strategic interactions and airport pricing in a dynamic bottleneck model of congestion. / Silva Montalva, H.E.; Verhoef, E.T.; van den Berg, V.A.C.

In: Journal of Urban Economics, Vol. 80, 2014, p. 13-27.

Research output: Contribution to JournalArticleAcademicpeer-review

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