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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Small, K.A. & Gomez-Ibanez, J.A., 1996.
"Urban Transportation,"
Papers
95-96-4, California Irvine - School of Social Sciences.
Other versions:
Small, Kenneth A. & Gomez-Ibanez, Jose A., 1999.
"Urban transportation,"
Handbook of Regional and Urban Economics,
in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 46, pages 1937-1999
Elsevier.
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