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Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil

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Author Info
Christopher Mayer
Todd Sinai

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Abstract

We examine two factors that explain air traffic congestion: network benefits due to hubbing and congestion externalities. While both factors impact congestion, we find that the hubbing effect dominates empirically. Hub carriers incur most of the additional travel time from hubbing, primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time. Non-hub flights at the same hub airports operate with minimal additional travel time. These results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports. (JEL L2, L5, L9, D6)

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File URL: http://hdl.handle.net/10.1257/000282803769206269
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 4 (September)
Pages: 1194-1215
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:4:p:1194-1215

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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. 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)
  2. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July. [Downloadable!] (restricted)
  3. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December. [Downloadable!]
  4. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October. [Downloadable!] (restricted)
  5. Singal, Vijay, 1996. "Airline Mergers and Competition: An Integration of Stock and Product Price Effects," Journal of Business, University of Chicago Press, vol. 69(2), pages 233-68, April. [Downloadable!] (restricted)
  6. Hendricks, Ken & Piccione, Michele & Tan, Guofu, 1995. "The Economics of Hubs: The Case of Monopoly," Review of Economic Studies, Blackwell Publishing, vol. 62(1), pages 83-99, January. [Downloadable!] (restricted)
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  7. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter. [Downloadable!] (restricted)
  8. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May. [Downloadable!] (restricted)
  9. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law & Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  10. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June. [Downloadable!] (restricted)
  11. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn. [Downloadable!] (restricted)
  12. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
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  13. 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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  14. 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)
  15. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn. [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. Joseph I. Daniel, 2009. "The Deterministic Bottleneck Model with Non-Atomistic Traffic," Working Papers 09-08, University of Delaware, Department of Economics. [Downloadable!]
  2. 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)
  3. Jon Strand & Michael Keen, 2006. "Indirect Taxes on International Aviation," IMF Working Papers 06/124, International Monetary Fund. [Downloadable!]
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  4. Michael Mazzeo, 2003. "Competition and Service Quality in the U.S. Airline Industry," Review of Industrial Organization, Springer, vol. 22(4), pages 275-296, June. [Downloadable!] (restricted)
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