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Airport Marginal Cost Pricing: Discussion and an Application to Swedish Airports

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Author Info

  • Carlsson, Fredrik

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

We derive an optimal airport-pricing model, both with and without a constraint on the revenues, that includes all relevant external marginal costs,. Given the results of the model we discuss the implications on the profit of airports, and find that given that the proceeds of the environmental charges are seen as revenue for the airport, it is not obvious that a marginal cost-pricing scheme would result in financial deficits for the airports, this despite the reasonable assumption of increasing returns to scale in airport capacity. Using relatively crude estimates of the marginal costs, we compare the current pricing scheme with a marginal cost pricing scheme. We find that the effect on revenues of moving towards a marginal cost pricing scheme may not be so dramatic; especially not if the marginal external costs include estimated marginal costs of CO2 emissions.

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File URL: http://hdl.handle.net/2077/2849
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 85.

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Length: 21 pages
Date of creation: 20 Dec 2002
Date of revision:
Publication status: Published in International Journal of Transport Economics , 2003, pages 283-303.
Handle: RePEc:hhs:gunwpe:0085

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: Airport pricing; marginal cost pricing; emission charge;

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References

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  1. Borenstein, Severin, 1988. "On the Efficiency of Competitive Markets for Operating Licenses," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(2), pages 357-85, May.
  2. Fredrik Carlsson, 2000. "Environmental Taxation and Strategic Commitment in Duopoly Models," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 15(3), pages 243-256, March.
  3. Algers, Staffan & Bergström, Pål & Dahlberg, Matz & Lindqvist Dillén, Johanna, 1998. "Mixed Logit Estimation of the Value of Travel Time," Working Paper Series, Uppsala University, Department of Economics 1998:15, Uppsala University, Department of Economics.
  4. Mohring, Herbert, 1970. "The Peak Load Problem with Increasing Returns and Pricing Constraints," American Economic Review, American Economic Association, American Economic Association, vol. 60(4), pages 693-705, September.
  5. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1357-1375, December.
  6. Morrison, Steven A., 1987. "The equity and efficiency of runway pricing," Journal of Public Economics, Elsevier, Elsevier, vol. 34(1), pages 45-60, October.
  7. Brueckner, Jan K, 2002. "Internalization of airport congestion," Journal of Air Transport Management, Elsevier, Elsevier, vol. 8(3), pages 141-147.
  8. Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, American Economic Association, vol. 60(3), pages 310-19, June.
  9. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, Elsevier, vol. 33(4), pages 287-296, December.
  10. Bernard M.S. van Praag & B.E. Baarsma, 2001. "The Shadow Price of Aircraft Noise Nuisance," Tinbergen Institute Discussion Papers 01-010/3, Tinbergen Institute.
  11. Carlsson , Fredrik, 2000. "Environmental Taxation in Airline Markets," Working Papers in Economics, University of Gothenburg, Department of Economics 24, University of Gothenburg, Department of Economics.
  12. Bernard M.S. van Praag & B.E. Baarsma, 2000. "The Shadow Price of Aircraft Noise Nuisance," Tinbergen Institute Discussion Papers 00-004/3, Tinbergen Institute.
  13. Levine, Michael E, 1969. "Landing Fees and the Airport Congestion Problem," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 12(1), pages 79-108, April.
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