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Vertical Governance between Airlines and Airports – A Transaction Cost Analysis

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Author Info
Johannes Fuhr () (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)
Thorsten Beckers () (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)

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Abstract

With airport privatization and infrastructure expansion projects taking place in the liberalized European air transport market, airport and airline companies are critically reevaluating their vertical governance structures. This paper analyzes the comparative efficiency of vertical governance structures in the airport-airline supply relationship. Using transaction cost economics as the lens of analysis, we develop propositions and present supporting qualitative case studies. Our propositions state that hub airlines and hub airports seek specialized governance structures, while value-based carriers and base airports enter into long-term contracts supported by complementary safeguards. These privately crafted governance modes complement or even replace external regulation.

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File URL: http://www.cni.tu-berlin.de/fileadmin/documents/RePEc/cni/working_paper/fuhr_beckers_2006-Vertical%20Governance%20Airlines%20and%20Airports---cni_wp_no_2006-04.pdf
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Publisher Info
Paper provided by Center for Network Industries and Infrastructure (CNI) in its series Working Papers with number 2006-04.

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Length: 27 pages
Date of creation: 2006
Date of revision:
Publication status: Published in Review of Network Economics, 2006, Vol 5, Issue 4, p. 386-412
Handle: RePEc:cni:wpaper:2006-04

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Web page: http://www.cni.tu-berlin.de
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Related research
Keywords: vertical integration transaction cost airlines airports competition

Other versions of this item:

Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
    Other versions:
  8. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March. [Downloadable!] (restricted)
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  13. Pirrong, Stephen Craig, 1993. "Contracting Practices in Bulk Shipping Markets: A Transactions Cost Explanation," Journal of Law & Economics, University of Chicago Press, vol. 36(2), pages 937-76, October.
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  15. Crocker, Keith J & Masten, Scott E, 1996. "Regulation and Administered Contracts Revisited: Lessons from Transaction-Cost Economics for Public Utility Regulation," Journal of Regulatory Economics, Springer, vol. 9(1), pages 5-39, January.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Johannes Fuhr, 2006. "(De)regulation of the European Ramp Handling Market – Lessons to Be Learned from an Institutional Perspective?," Working Papers 2006-08, Center for Network Industries and Infrastructure (CNI). [Downloadable!]
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