Airport congestion pricing and cost recovery with side business

This paper analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power. The analysis shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions. Under a Cournot oligopoly, however, carriers are shown to internalize only the congestion they impose on themselves. A toll that captures the uninternalized portion of congestion may then improve the allocation of traffic. The analysis is supported by some rudimentary empirical evidence.

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Another Look at Airport Congestion Pricing

The American Economic Review ◽

10.1257/aer.97.5.1970 ◽

2007 ◽

Vol 97 (5) ◽

pp. 1970-1977 ◽

Cited By ~ 62

Author(s):

Steven A Morrison ◽

Clifford Winston

Keyword(s):

Recent Work ◽

Small Difference ◽

Congestion Pricing ◽

Optimal Pricing ◽

Efficiency Loss ◽

Pricing Policies ◽

Net Benefits ◽

Airport Congestion

We study alternate approaches to implement congestion pricing at US airports. Conventional formulations toll all aircraft without determining whether a plane operated by a given airline delays other planes that it operates or planes operated by other airlines. Recent work points out optimal pricing calls for carriers to be charged only for the delay they impose on other airlines. We find a small difference between the net benefits generated by the two congestion-pricing policies because the bulk of airport delays are not internalized and because the efficiency loss from pricing internalized congestion is small. (JEL L11, L93, R41)

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Distributional Consequences of Airport Congestion Pricing

Journal of Urban Economics ◽

10.1006/juec.2000.2210 ◽

2001 ◽

Vol 50 (2) ◽

pp. 230-258 ◽

Cited By ~ 40

Author(s):

Joseph I. Daniel

Keyword(s):

Congestion Pricing ◽

Distributional Consequences ◽

Airport Congestion

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Airline Frequency Competition in Airport Congestion Pricing

Transportation Research Record Journal of the Transportation Research Board ◽

10.3141/2266-08 ◽

2012 ◽

Vol 2266 (1) ◽

pp. 69-77 ◽

Cited By ~ 5

Author(s):

Vikrant Vaze ◽

Cynthia Barnhart

Keyword(s):

Congestion Pricing ◽

Constant Load ◽

Vital Role ◽

Load Factors ◽

Marginal Cost Pricing ◽

Efficient Resource ◽

Airport Congestion ◽

The Impact ◽

High Congestion ◽

Airport Slots

Airport congestion pricing has often been advocated as a way to control demand for airport operations and achieve efficient resource allocation. Competition between airlines affects the extent to which an airline is willing to pay for airport slots. Accurate modeling of competition is critical to determining the effectiveness of a congestion pricing mechanism. This paper develops an equilibrium model of airline frequency competition in the presence of delay costs and congestion prices. A small hypothetical network is used to evaluate the impacts of congestion prices on the various stakeholders and to investigate the dependence of effectiveness of congestion pricing on the characteristics of frequency competition in individual markets. The effectiveness of congestion pricing depends on three parameters of frequency competition. The results show that variation in the number of passengers per flight plays a vital role in determining the degree of attractiveness of congestion pricing to the airlines. A significant part of the impact of congestion pricing cannot be accounted for by using models in the literature, which are based on the assumptions of constant load factors and constant aircraft sizes. It was found that, compared with flat pricing, marginal cost pricing is more effective in reducing congestion without penalizing the airlines with exceedingly high congestion prices.

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