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Concession revenue and optimal airport pricing

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  • Zhang, Anming
  • Zhang, Yimin
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    Abstract

    In recent years airports have been under growing pressure to become financially self-sufficient and to pursue profit maximization in their non-aeronautical or concession operations. In this paper we examine the optimal pricing in a model where concession and aeronautical operations of an airport are considered together with an overall break-even constraint. We find that the optimum solution may require a subsidy from concession to aeronautical operations. However, such a cross-subsidy may or may not restore marginal-cost pricing on aeronautical operations. On the other hand, social welfare can be higher when an airport is allowed to make profits in concession operations than when marginal-cost pricing is imposed on concession operations.

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    Bibliographic Info

    Article provided by Elsevier in its journal Transportation Research Part E: Logistics and Transportation Review.

    Volume (Year): 33 (1997)
    Issue (Month): 4 (December)
    Pages: 287-296

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    Handle: RePEc:eee:transe:v:33:y:1997:i:4:p:287-296

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    Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description

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    Related research

    Keywords: airport pricing and financing concession revenue social welfare;

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    Citations

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    Cited by:
    1. Mantin, Benny, 2012. "Airport complementarity: Private vs. government ownership and welfare gravitation," Transportation Research Part B: Methodological, Elsevier, vol. 46(3), pages 381-388.
    2. Hangjun Yang & Anming Zhang, 2011. "Price-cap regulation of congested airports," Journal of Regulatory Economics, Springer, vol. 39(3), pages 293-312, June.
    3. De Borger, Bruno & Van Dender, Kurt, 2006. "Prices, capacities and service levels in a congestible Bertrand duopoly," Journal of Urban Economics, Elsevier, vol. 60(2), pages 264-283, September.
    4. Wei, Wenbin, 2006. "Impact of landing fees on airlines’ choice of aircraft size and service frequency in duopoly markets," Journal of Air Transport Management, Elsevier, vol. 12(6), pages 288-292.
    5. Basso, Leonardo J., 2008. "Airport deregulation: Effects on pricing and capacity," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1015-1031, July.
    6. Fay Dunkerley & André de Palma & Stef Proost, 2007. "Spatial asymmetric duopoly with an application to Brussels’ airports," THEMA Working Papers 2007-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    7. Carlsson, Fredrik, 2002. "Airport Marginal Cost Pricing: Discussion and an Application to Swedish Airports," Working Papers in Economics 85, University of Gothenburg, Department of Economics.
    8. Bilotkach, Volodymyr & Clougherty, Joseph A. & Mueller, Juergen & Zhang, Anming, 2011. "Regulation, Privatization, and Airport Charges: Panel Data Evidence from European Airports," CEPR Discussion Papers 8618, C.E.P.R. Discussion Papers.
    9. Valentina Bracaglia & Tiziana D'Alfonso & Alberto Nastasi, 2014. "Multiproduct airport competition and e-commerce strategies," DIAG Technical Reports 2014-04, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    10. Basso, Leonardo J. & Zhang, Anming, 2008. "On the relationship between airport pricing models," Transportation Research Part B: Methodological, Elsevier, vol. 42(9), pages 725-735, November.
    11. Zhang, Anming & Zhang, Yimin, 2010. "Airport capacity and congestion pricing with both aeronautical and commercial operations," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 404-413, March.
    12. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
    13. Appold, Stephen J. & Kasarda, John D., 2006. "The appropriate scale of US airport retail activities," Journal of Air Transport Management, Elsevier, vol. 12(6), pages 277-287.
    14. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2013. "Demand uncertainty and airport capacity choice," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 91-104.
    15. Chi-Lok, Andrew Yuen & Zhang, Anming, 2009. "Effects of competition and policy changes on Chinese airport productivity: An empirical investigation," Journal of Air Transport Management, Elsevier, vol. 15(4), pages 166-174.
    16. Czerny, Achim I., 2010. "Airport congestion management under uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 371-380, March.
    17. Franz Fuerst & Sven Gross & Ulf Klose, . "The Sky is the Limit? The Determinants and Constraints of European Airports' Commercial Revenues," Real Estate & Planning Working Papers rep-wp2010-14, Henley Business School, Reading University.
    18. repec:ebl:ecbull:v:12:y:2008:i:8:p:1-7 is not listed on IDEAS
    19. Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.

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