AbstractConventional economic wisdom suggests that congestion pricing would be an appropriate response to cope with the growing congestion levels currently experienced at many airports. Several characteristics of aviation markets, however, may make naive congestion prices equal to the value of marginal travel delays a non-optimal response. This paper develops a model of airport pricing that captures a number of these features. The model reflects (1) that airlines typically have market power; (2) that part of external travel delays that aircraft impose are internal to an operator; (3) that the airlines' consumers may impose external benefits of increased frequencies upon one-another; (4) that airports need not be regulated by the same authority; and (5) that an individual airline's network will not be exogenous. We present an analytical treatment for an undetermined number of nodes, links and operators in a network of undetermined size and shape, and numerical exercises for a small triangular network. Some main conclusions are that second-best optimal tolls are typically below marginal external congestion costs alone and may even be negative, that pricing may induce changes in network configurations, and that cooperation between regulators need not be stable but that non-cooperation may lead to welfare losses, also when compared to a no-tolling situation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-078/3.
Date of creation: 06 Aug 2002
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Erik T. Verhoef, 2012. "Cost Recovery of Congested Infrastructure under Market Power," Tinbergen Institute Discussion Papers 12-064/3, Tinbergen Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.