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Auctions as a vehicle to reduce airport delays and achieve value capture

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Author Info

  • Jeffrey P. Cohen
  • Cletus C. Coughlin
  • Lesli S. Ott

Abstract

Congestion at airports imposes large costs on airlines and their passengers. A key reason for congestion is that an airline schedules its flights without regard to the costs imposed on other airlines and their passengers. As a result, during some time intervals, airlines schedule more flights to and from an airport than that airport can accommodate and flights are delayed. This paper explores how a specific market-based proposal by the Federal Aviation Administration (FAA), which includes the use of auctions to determine the right to arrive or depart in a specific time interval at airports in the New York City area, might be used as part of a strategy to mitigate delays and congestion. By explaining the underlying economic theory and key arguments with minimal technical jargon, the paper allows those with little formal training in economics to understand the fundamental issues associated with the FAA's controversial proposal. Moreover, the basics of the proposed auction process, known as a combinatorial auction, and value capture are also explained.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2009)
Issue (Month): Nov ()
Pages: 569-588

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Handle: RePEc:fip:fedlrv:y:2009:i:nov:p:569-588:n:v.91no.6

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Related research

Keywords: Airlines ; Airports;

References

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  1. W. Tom Whalen & Dennis W. Carlton & Ken Heyer & Oliver Richard, 2007. "Proposal For A Market-Based Solution to Airport Delays," EAG Competition Advocacy Papers 200714, Department of Justice, Antitrust Division.
  2. 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.
  3. Lester G. Telser, 1994. "The Usefulness of Core Theory in Economics," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 151-164, Spring.
  4. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
  5. Jeffrey P. Cohen & Cletus C. Coughlin, 2003. "Congestion at airports: the economics of airport expansions," Review, Federal Reserve Bank of St. Louis, issue May, pages 9-26.
  6. Czerny, Achim I., 2006. "Congestion pricing vs. slot constraints to airport networks," Discussion Papers 2006/3, Technische Universit├Ąt Berlin, School of Economics and Management.
  7. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
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