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Airport Congestion When Carriers Have Market Power

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Jan K. Brueckner

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Abstract

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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File URL: http://hdl.handle.net/10.1257/000282802762024548
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File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=92&issue=5&article=5&issue_date=December2002
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 92 (2002)
Issue (Month): 5 (December)
Pages: 1357-1375
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Handle: RePEc:aea:aecrev:v:92:y:2002:i:5:p:1357-1375

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Christopher Mayer & Todd Sinai, 2002. "Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why All Delays Are Not Evil," NBER Working Papers 8701, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, vol. 60(3), pages 310-19, June. [Downloadable!] (restricted)
  3. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March. [Downloadable!] (restricted)
  4. Small, K.A. & Gomez-Ibanez, J.A., 1996. "Urban Transportation," Papers 95-96-4, California Irvine - School of Social Sciences.
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  5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  6. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August. [Downloadable!] (restricted)
  7. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August. [Downloadable!] (restricted)
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  8. Daniel, Joseph I. & Pahwa, Munish, 2000. "Comparison of Three Empirical Models of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 47(1), pages 1-38, January. [Downloadable!] (restricted)
  9. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-70, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jan K. Brueckner, 2002. "Internalization of Airport Congestion: A Network Analysis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Jan K. Brueckner, 2008. "Slot-Based Approaches to Airport Congestion Management," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. Harumi Ito & Darin Lee, 2003. "Assessing the Impact of the September 11 Terrorist Attacks on U.S. Airline Demand," Working Papers 2003-16, Brown University, Department of Economics. [Downloadable!]
    Other versions:
  4. Jan K. Brueckner & Erik T. Verhoef, 2009. "Manipulable Congestion Tolls," Tinbergen Institute Discussion Papers 09-009/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  5. Joseph I. Daniel, 2009. "The Deterministic Bottleneck Model with Non-Atomistic Traffic," Working Papers 09-08, University of Delaware, Department of Economics. [Downloadable!]
  6. isamu matsukawa, 2005. "Congestion pricing of inputs in vertically related markets," Industrial Organization 0506012, EconWPA. [Downloadable!]
  7. Fay Dunkerley & André De Palma & Stef Proost, 2008. "Spatial asymmetric duopoly with an application to Brussels' airports," Working Papers hal-00348443_v1, HAL. [Downloadable!]
    Other versions:
  8. De Borger B. & Proost S. & Van Dender K., 2007. "Private Port Pricing and Public Investment in Port and Hinterland Capacity," Working Papers 2007019, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
    Other versions:
  9. Nicholas G. Rupp & George M. Holmes & Jeff DeSimone, . "Airline Schedule Recovery after Airport Closures: Empirical Evidence since September 11th," Working Papers 0207, East Carolina University, Department of Economics. [Downloadable!]
    Other versions:
  10. Carlsson, Fredrik, 2002. "Airport Marginal Cost Pricing: Discussion and an Application to Swedish Airports," Working Papers in Economics 85, Göteborg University, Department of Economics. [Downloadable!]
  11. Christopher Mayer & Todd Sinai, 2003. "Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil," American Economic Review, American Economic Association, vol. 93(4), pages 1194-1215, September. [Downloadable!]
  12. Severin Borenstein & Nancy L. Rose, 2007. "How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry," NBER Working Papers 13452, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Joseph I. Daniel & Katherine Thomas Harback, 2005. "Do Airlines that Dominate Traffic at Hub Airports Experience Less Delay?," Working Papers 05-09, University of Delaware, Department of Economics. [Downloadable!]
  14. Jon Strand & Michael Keen, 2006. "Indirect Taxes on International Aviation," IMF Working Papers 06/124, International Monetary Fund. [Downloadable!]
    Other versions:
  15. Mark Lijesen & Peter Nijkamp & Eric Pels, 2005. "The Home Carrier Advantage in Civil Aviation," Tinbergen Institute Discussion Papers 05-011/3, Tinbergen Institute. [Downloadable!]
  16. Achim I. Czerny, 2006. "Congestion Pricing vs. Slot Constraints to Airport Networks," Working Papers 2006-02, Center for Network Industries and Infrastructure (CNI). [Downloadable!]
  17. Achim I. Czerny, 2007. "Congestion management under uncertainty in a two-airport system," Working Papers 2007-01, Center for Network Industries and Infrastructure (CNI). [Downloadable!]
  18. Harumi Ito & Darin Lee, 2003. "Low Cost Carrier Growth in the U.S. Airline Industry: Past, Present, and Future," Working Papers 2003-12, Brown University, Department of Economics. [Downloadable!]
  19. Joseph I Daniel & Katherine Thomas Harback, 2008. "Pricing the major hub airports," Working Papers 08-13, University of Delaware, Department of Economics. [Downloadable!]
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