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A model of airport slot allocation with posted prices

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Author Info

  • Nicolas Gruyer

    ()
    (LEEA (air transport economics laboratory), ENAC)

  • Kevin Guittet

    (DSNA/DTI/R&D)

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    Abstract

    In this paper, we study the impact of the introduction of posted prices in the slot allocation process currently in use at congested airports in most European countries. In particular, we show that if the airport is initially saturated, while low level of slot prices entail no response from the airlines, requests for slots ”suddenly and violently” drop when the price reaches a certain threshold. In general, there is therefore no market clearing price for airport slots. We also present a dynamic model which highlights how the current grandfather rule - stating that slots used today are kept in the future - generates baby-sitting, that is airlines requiring and using slots today just because they expect them to be profitable in the future.

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    File URL: http://gruyern.free.fr/wpaper/gruyerguittet.pdf
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    Bibliographic Info

    Paper provided by LEEA (air transport economics laboratory), ENAC (french national civil aviation school) in its series Economics Working Papers with number 05.

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    Length: 31 pages
    Date of creation: 29 Oct 2008
    Date of revision:
    Handle: RePEc:enc:abcdef:airportslots5

    Note: Type of Document - pdf; pages: 31.
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    Related research

    Keywords: Capacity-constrained competition; airport slots;

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    References

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    1. Volker Nocke & Peter EsoLucy White, 2007. "Competition for Scarce Resources," Economics Series Working Papers 365, University of Oxford, Department of Economics.
    2. Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, vol. 60(3), pages 310-19, June.
    3. GABSZEWICZ, Jean J. & PODDAR , Sougata, 1995. "Demand Fluctuations and Capacity Utilization under Duopoly," CORE Discussion Papers 1995051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    5. Reynolds-Feighan, Aisling J. & Button, Kenneth J., 1999. "An assessment of the capacity and congestion levels at European airports," Journal of Air Transport Management, Elsevier, vol. 5(3), pages 113-134.
    6. S.J. Rassenti & V.L. Smith & R.L. Bulfin, 1982. "A Combinatorial Auction Mechanism for Airport Time Slot Allocation," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 402-417, Autumn.
    7. Reynolds-Feighan, Aisling & Button, Kenneth J., 1999. "An Assessment of the Capacity and Congestion levels at European Airports," ERSA conference papers ersa99pa241, European Regional Science Association.
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