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.
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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:
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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)
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