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Airport Cities and Multiproduct Pricing

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  • Tiziana D’Alfonso
  • Valentina Bracaglia
  • Yulai Wan

Abstract

We study pricing of aviation and non-aviation products in a private monopolistic airport city and model two features. First, non-aviation goods are demanded by both air travellers and non-travellers. Second, the utility from consuming non-aviation goods may depend on whether the consumer travels or not. The impacts of these features on optimal aviation and non-aviation charges would depend on whether individuals foresee the utility of non-aviation goods or not while deciding to buy air tickets. It is profit maximising and welfare enhancing to manipulate the non-aviation product mix in a way that raises the extra surplus gained by travellers.

Suggested Citation

  • Tiziana D’Alfonso & Valentina Bracaglia & Yulai Wan, 2017. "Airport Cities and Multiproduct Pricing," Journal of Transport Economics and Policy, University of Bath, vol. 51(4), pages 290-29-312.
    • Handle: RePEc:tpe:jtecpo:2017:51:4:290--312
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