Flight delays, capacity investment and social welfare under air transport supply-demand equilibrium
AbstractThis paper analyzes benefits from aviation infrastructure investment under competitive supply-demand equilibrium. The analysis recognizes that, in the air transportation system where economies of density is an inherent characteristic, capacity change would trigger a complicated set of adjustment of and interplay among passenger demand, air fare, flight frequency, aircraft size, and flight delays, leading to an equilibrium shift. An analytical model that incorporates these elements is developed. The results from comparative static analysis show that capacity constraint suppresses demand, reduces flight frequency, and increases passenger generalized cost. Our numerical analysis further reveals that, by switching to larger aircraft size, airlines manage to offset part of the delay effect on unit operating cost, and charge passengers lower fare. With higher capacity, airlines tend to raise both fare and frequency while decreasing aircraft size. More demand emerges in the market, with reduced generalized cost for each traveler. The marginal benefit brought by capacity expansion diminishes as the capacity-demand imbalance becomes less severe. Existing passengers in the market receive most of the benefit, followed by airlines. The welfare gains from induced demand are much smaller. The equilibrium approach yields more plausible investment benefit estimates than does the conventional method. In particular, when forecasting future demand the equilibrium approach is capable of preventing the occurrence of excessive high delays.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.
Volume (Year): 46 (2012)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description
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.:
- Brueckner, Jan K. & Girvin, Raquel, 2008.
"Airport noise regulation, airline service quality, and social welfare,"
Transportation Research Part B: Methodological,
Elsevier, vol. 42(1), pages 19-37, January.
- Jan K. Brueckner & Raquel Girvin, 2006. "Airport Noise Regulation, Airline Service Quality, and Social Welfare," Working Papers 060706, University of California-Irvine, Department of Economics.
- Jan K. Brueckner & Raquel Girvin, 2006. "Airport Noise Regulation, Airline Service Quality, and Social Welfare," CESifo Working Paper Series 1820, CESifo Group Munich.
- Hansen, Mark, 2002. "Micro-level analysis of airport delay externalities using deterministic queuing models: a case study," Journal of Air Transport Management, Elsevier, vol. 8(2), pages 73-87.
- Zhang, Yimin, 2010. "Network structure and capacity requirement: The case of China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 189-197, March.
- Flores-Fillol, Ricardo, 2010. "Congested hubs," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 358-370, March.
- Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
- Brueckner, Jan K. & Zhang, Anming, 2010.
"Airline emission charges: Effects on airfares, service quality, and aircraft design,"
Transportation Research Part B: Methodological,
Elsevier, vol. 44(8-9), pages 960-971, September.
- Jan K. Brueckner & Anming Zhang, 2009. "Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design," Working Papers 080916, University of California-Irvine, Department of Economics.
- Jan K. Brueckner & Anming Zhang, 2009. "Airline Emission Charges: Effects on Airfares, Service Quality, and Aircraft Design," CESifo Working Paper Series 2547, CESifo Group Munich.
- Schipper, Youdi & Rietveld, Piet & Nijkamp, Peter, 2003. "Airline deregulation and external costs: a welfare analysis," Transportation Research Part B: Methodological, Elsevier, vol. 37(8), pages 699-718, September.
- Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May.
- Turnovsky, Stephen J & Shalit, Haim & Schmitz, Andrew, 1980. "Consumer's Surplus, Price Instability, and Consumer Welfare," Econometrica, Econometric Society, vol. 48(1), pages 135-52, January.
- Morrison, Steven A. & Winston, Clifford, 2008. "The effect of FAA expenditures on air travel delays," Journal of Urban Economics, Elsevier, vol. 63(2), pages 669-678, March.
- Hansen, Mark M. & Gillen, David & Djafarian-Tehrani, Reza, 2001. "Aviation infrastructure performance and airline cost: a statistical cost estimation approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(1), pages 1-23, March.
- Jorge-CalderÃ³n, J.D., 1997. "A demand model for scheduled airline services on international European routes," Journal of Air Transport Management, Elsevier, vol. 3(1), pages 23-35.
- Richard, Oliver, 2003. "Flight frequency and mergers in airline markets," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 907-922, June.
- Steven A. Morrison & Clifford Winston, 2007. "Another Look at Airport Congestion Pricing," American Economic Review, American Economic Association, vol. 97(5), pages 1970-1977, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.