Vertical Agreements Between Airports And Carriers
AbstractThis paper investigates vertical contracts between airports and airlines, in the context of two competing facilities and three different types of agreements. The downstream market consists in a route operated by one leader and n-1 follower competing à la Stackelberg in each airport. In this sense, the paper adds to literature as it considers the issue of vertical contracts both in the airports competition and airlines competition. We develop a multistage facility-rivalry game where each airport and the respective dominant airline decide whether to enter into a contract and, if so, which one to engage in. In this framework, we investigate the Nash equilibrium to analyse the incentives for vertical contracts: we find that the airport and the dominant airline have incentive to collude in each facility. Nevertheless, the equilibrium is not efficient in terms of social welfare, so that there is a misalignment between private and social incentives
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Bibliographic InfoPaper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIS Technical Reports with number 2010-19.
Date of creation: 2010
Date of revision:
vertical contracts; airports competition; airlines competition;
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