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Sequential peak-load pricing: the case of airports and airlines

Author

Listed:
  • Leonardo J. Basso
  • Anming Zhang

Abstract

We investigate airport peak-load pricing using a vertical structure of airport and airlines. We find that a profit-maximizing airport would charge higher peak and off-peak runway prices and a higher peak/off-peak price differential than a public airport. Consequently, airport privatization would lead to both fewer total passengers and fewer passengers in the peak period. Although peak-travelling passengers benefit from fewer delays, this low level of peak congestion is not efficient, suggesting that airport privatization cannot be judged based on its effect on congestion alone. We also examine pricing behaviour of a public airport constrained to charge a time independent price.

Suggested Citation

  • Leonardo J. Basso & Anming Zhang, 2008. "Sequential peak-load pricing: the case of airports and airlines," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 1087-1119, August.
    • Handle: RePEc:cje:issued:v:41:y:2008:i:3:p:1087-1119
    DOI: 10.1111/j.1540-5982.2008.00497.x
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    More about this item

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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