Congestion Pricing, Slot Sales and Slot Trading in Aviation
AbstractThis paper studies the regulation of an airline duopoly on a congested airport. Regulation should then address two market failures: uninternalized congestion, and overpricing due to market power. We find that first-best charges are differentiated over airlines if asymmetric, and completely drive out the least efficient airline from the market. This is not generally the case for an undifferentiated charge, which is found to be a weighted average of first-best charge rules for the two airlines, and is less-than-optimally efficient because of its inability to differentiate between them. Tradeable slots may yield the first-best outcome if the congestion externality is relatively important and the market power distortion relatively unimportant, but may be less efficient than non-intervention when the reverse is true.
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 08-030/3.
Date of creation: 25 Mar 2008
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
Airport congestion; congestion pricing; slot trading; tradeable permits; second-best;
Other versions of this item:
- Verhoef, Erik T., 2010. "Congestion pricing, slot sales and slot trading in aviation," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 320-329, March.
- R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-GEO-2008-06-21 (Economic Geography)
- NEP-MIC-2008-06-21 (Microeconomics)
- NEP-REG-2008-06-21 (Regulation)
- NEP-URE-2008-06-21 (Urban & Real Estate Economics)
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.:
- Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Oum, Tae Hoon & Zhang, Yimin, 1990. "Airport pricing : Congestion tolls, lumpy investment, and cost recovery," Journal of Public Economics, Elsevier, vol. 43(3), pages 353-374, December.
- J. H. Dales, 1968. "Land, Water, and Ownership," Canadian Journal of Economics, Canadian Economics Association, vol. 1(4), pages 791-804, November.
- James A. Brander & Anming Zhang, 1990. "Market Conduct in the Airline Industry: An Empirical Investigation," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 567-583, Winter.
- Brueckner, Jan K., 2009. "Price vs. quantity-based approaches to airport congestion management," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 681-690, June.
- Pels, Eric & Verhoef, Erik T., 2004.
"The economics of airport congestion pricing,"
Journal of Urban Economics,
Elsevier, vol. 55(2), pages 257-277, March.
- Swan, William M. & Adler, Nicole, 2006. "Aircraft trip cost parameters: A function of stage length and seat capacity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(2), pages 105-115, March.
- Small, K.A. & Gomez-Ibanez, J.A., 1996.
95-96-4, California Irvine - School of Social Sciences.
- Verhoef Erik T., 1997.
Serie Research Memoranda
0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
- Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
- Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54.
- Jan K. Brueckner & Kurt Van Dender, 2007.
"Atomistic Congestion Tolls at Concentrated Airports? Seeking a Unified View in the Internalization Debate,"
CESifo Working Paper Series
2033, CESifo Group Munich.
- Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
- E Verhoef & P Nijkamp & P Rietveld, 1997. "Tradeable permits: their potential in the regulation of road transport externalities," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 24(4), pages 527-548, July.
- Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-70, March.
- Barbot, Cristina & Betancor, Ofelia & Socorro, M. Pilar & Viecens, M. Fernanda, 2014. "Trade-offs between environmental regulation and market competition: Airlines, emission trading systems and entry deterrence," Transport Policy, Elsevier, vol. 33(C), pages 65-72.
- Hugo E. Silva & Erik T. Verhoef, 2011. "Optimal Pricing of Flights and Passengers at Congested Airports: The Efficiency of Atomistic Charges," Tinbergen Institute Discussion Papers 11-179/3, Tinbergen Institute, revised 28 Mar 2013.
- Brueckner, Jan K. & Verhoef, Erik T., 2010.
"Manipulable congestion tolls,"
Journal of Urban Economics,
Elsevier, vol. 67(3), pages 315-321, May.
- Silva, Hugo E. & Verhoef, Erik T., 2013. "Optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges," Journal of Public Economics, Elsevier, vol. 106(C), pages 1-13.
- Hugo E. Silva & Erik T. Verhoef & Vincent A.C. van den Berg, 2012.
"Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion,"
Tinbergen Institute Discussion Papers
12-056/3, Tinbergen Institute, revised 15 Jul 2013.
- Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion," Journal of Urban Economics, Elsevier, vol. 80(C), pages 13-27.
- Paola Pellegrini & Lorenzo Castelli & Raffaele Pesenti, 2011. "Metaheuristic algorithms for the simultaneous slot allocation problem," Working Papers 9, Department of Management, Università Ca' Foscari Venezia.
- Jan K. Brueckner, 2008. "Slot-Based Approaches to Airport Congestion Management," CESifo Working Paper Series 2302, CESifo Group Munich.
- Pellegrini, Paola & Rodriguez, Joaquin, 2013. "Single European Sky and Single European Railway Area: A system level analysis of air and rail transportation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 57(C), pages 64-86.
- Hugo E. Silva & Erik T. Verhoef & Vincent A.C. van den Berg, 2012. "Airlines' Strategic Interactions and Airport Pricing in a Dynamic Bottleneck Model of Congestion," Tinbergen Institute Discussion Papers 12-056/3, Tinbergen Institute, revised 15 Jul 2013.
- repec:aeg:report:2014-3 is not listed on IDEAS
- Lin, Ming Hsin, 2013. "Airport privatization in congested hub–spoke networks," Transportation Research Part B: Methodological, Elsevier, vol. 54(C), pages 51-67.
- Alessandro Avenali & Tiziana D'Alfonso & Claudio Leporelli & Giorgio Matteucci & Alberto Nastasi & Pierfrancesco Reverberi, 2014. "A supervised market mechanism for efficient airport slot allocation," DIAG Technical Reports 2014-03, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
- Pellegrini, Paola & Castelli, Lorenzo & Pesenti, Raffaele, 2012. "Secondary trading of airport slots as a combinatorial exchange," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 1009-1022.
- Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2013. "Demand uncertainty and airport capacity choice," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 91-104.
- Lorenzo Castelli & Paola Pellegrini & Raffaele Pesenti, 2010. "Airport slot allocation in Europe: economic efficiency and fairness," Working Papers 197, Department of Applied Mathematics, Università Ca' Foscari Venezia.
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.