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Congestion Pricing, Slot Sales and Slot Trading in Aviation

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Author Info
Erik T. Verhoef () (VU University Amsterdam)

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Abstract

This 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.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-030/3.

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Date of creation: 25 Mar 2008
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Handle: RePEc:dgr:uvatin:20080030

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: Airport congestion; congestion pricing; slot trading; tradeable permits; second-best;

Other versions of this item:

Find related papers by JEL classification:
R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion
R48 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government Pricing; Regulatory Policies
D62 - Microeconomics - - Welfare Economics - - - Externalities

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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.:
  1. 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. [Downloadable!] (restricted)
  2. Verhoef Erik T., 1997. "Externalities," Serie Research Memoranda 0031, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
  3. 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. [Downloadable!] (restricted)
  4. Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 37-54. [Downloadable!] (restricted)
  5. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March. [Downloadable!] (restricted)
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  6. 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. [Downloadable!] (restricted)
  7. J. H. Dales, 1968. "Land, Water, and Ownership," Canadian Journal of Economics, Canadian Economics Association, vol. 1(4), pages 791-804, November. [Downloadable!] (restricted)
  8. Vickrey, William S, 1969. "Congestion Theory and Transport Investment," American Economic Review, American Economic Association, vol. 59(2), pages 251-60, May. [Downloadable!] (restricted)
  9. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March. [Downloadable!] (restricted)
  10. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December. [Downloadable!] (restricted)
  11. Small, K.A. & Gomez-Ibanez, J.A., 1996. "Urban Transportation," Papers 95-96-4, California Irvine - School of Social Sciences.
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  12. 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. [Downloadable!] (restricted)
  13. 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. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
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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. Jan K. Brueckner, 2008. "Slot-Based Approaches to Airport Congestion Management," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Joseph I. Daniel, 2009. "Pricing Canadian Airports," Working Papers 09-02, University of Delaware, Department of Economics. [Downloadable!]
  3. Joseph I. Daniel, 2009. "The Untolled Problems with Airport Slot Constraints," Working Papers 09-09, University of Delaware, Department of Economics. [Downloadable!]
  4. Jan K. Brueckner & Erik T. Verhoef, 2009. "Manipulable Congestion Tolls," Tinbergen Institute Discussion Papers 09-009/3, Tinbergen Institute. [Downloadable!]
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