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Hub-airport congestion pricing and capacity investment

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  • Lin, Ming Hsin
  • Zhang, Yimin

Abstract

This study examines hub-airport congestion pricing and capacity investment using a simple hub-spoke network model, in which hub-carrier scheduling causes both schedule delays and congestion delays. The “fixed-proportion assumption” is removed. We find the following. (i) A public hub airport requires both per-flight charges, which must be movement-related but cannot be weight-related, and discriminatory per-local and per-connecting passenger charges to reach the first-best outcome. (ii) Either weight-related per-flight charges or the marginal-operating-cost (MOC) pricing on local and/or connecting passengers cannot reach the first-best. (iii) First-best charges can lead capacity investment to be socially efficient. However, weight-related per-flights charges result in under-investment, whereas the MOC pricing results in over-investment in runway capacity. (iv) Private hubs that charge positive movement-related per-flight charges subsidize passengers through per-passenger charges. Finally, (v) movement-related per-flight charges lead private hubs to overinvest, whereas weight-related per-flight charges lead to either over- or under-investment.

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  • Lin, Ming Hsin & Zhang, Yimin, 2017. "Hub-airport congestion pricing and capacity investment," Transportation Research Part B: Methodological, Elsevier, vol. 101(C), pages 89-106.
    • Handle: RePEc:eee:transb:v:101:y:2017:i:c:p:89-106
    DOI: 10.1016/j.trb.2017.03.009
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    Cited by:

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    3. Dixit, Aasheesh & Jakhar, Suresh Kumar, 2021. "Airport capacity management: A review and bibliometric analysis," Journal of Air Transport Management, Elsevier, vol. 91(C).
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    5. Pierre Picard & Alessandro Tampieri & Xi Wan, 2023. "Deregulation and Efficiency in Slot-Constrained Airports," DEM Discussion Paper Series 23-14, Department of Economics at the University of Luxembourg.
    6. Pierre M. Picard & Alessandro Tampieri & Xi Wan, 2022. "Are Deregulated Airports More Efficient?," Working Papers - Economics wp2022_18.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    7. Lang, Hao & Czerny, Achim I., 2022. "Airport pricing versus (grandfathered) slots: A generalization," Economics of Transportation, Elsevier, vol. 29(C).
    8. Lin, Ming Hsin, 2022. "Pricing regime choices for international airports: A rationale for the non-discrimination principle," Economics of Transportation, Elsevier, vol. 31(C).
    9. Lang, Hao & Czerny, Achim I., 2023. "Comparison of decentralized slot and pricing policies when airports are substitutes for non-local passengers," Transportation Research Part A: Policy and Practice, Elsevier, vol. 171(C).
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    11. Aravena, Olivia & Basso, Leonardo J. & Figueroa, Nicolás, 2019. "Effects of asymmetric information on airport congestion management mechanisms," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 4-27.
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    More about this item

    Keywords

    Hub-carrier scheduling; Schedule and congestion delay; Hub-airport congestion pricing; Movement-/weight-related charge; Capacity investment; Profit-maximizing hub airport;
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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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