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Market power and the need for regulation in the German airport market

Author

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  • Robert Malina

    (Institute of Transport Economics, University of Muenster)

Abstract

With the increasing profit orientation of German airport operators the question as to weather they possess market power is gaining more importance. Whereas there have been some studies about the degree of market power of individual airports in countries as Australia and Great Britain, the German airport market has not yet been studied in detail. This paper is a part of a research project that tries to assess market power in this market. It indicates which of the 35 examined German airports possess market power and therefore need special regulatory attendence. We calculate a substitution coefficient for inter-airport competition that quantifies the quality of the best substitute for a certain airport. It is defined as the proportion of inhabitants within the relevant regional market of an airport that consider another airport, which has been identified as meeting the demands of the airlines, to be a good substitute from their perspective as well. The analysis is complemented by an assessment of intermodal substitution and countervailing power of airlines. The study gives strong indication that 23 out of the 35 German airports do not possess relevant market power. In contrast to this, four airports (HAM, FRA, MUC, STR) and Berlin Airport System (THF, TXL, SXF) have strong, five (BRE, DRS, LEJ, NUE, HAJ) have modest market power. The results provide a basis for the construction of an efficient regulatory framework for the German airport market.

Suggested Citation

  • Robert Malina, 2005. "Market power and the need for regulation in the German airport market," Working Papers 10, Institute of Transport Economics, University of Muenster, revised Mar 2006.
    • Handle: RePEc:mut:wpaper:10
    as

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    File URL: https://www.wiwi.uni-muenster.de/ivm/sites/ivm/files/documents/forschung/diskussionspapiere/diskussionspapier10.pdf
    File Function: Revised version, 2006
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    References listed on IDEAS

    as
    1. Cohas, François J & Belobaba, Peter P & Simpson, Robert W, 1995. "Competitive fare and frequency effects in airport market share modeling," Journal of Air Transport Management, Elsevier, vol. 2(1), pages 33-45.
    2. Denstadli, Jon Martin, 2004. "Impacts of videoconferencing on business travel: the Norwegian experience," Journal of Air Transport Management, Elsevier, vol. 10(6), pages 371-376.
    3. Joe S. Bain, 1941. "The Profit Rate as a Measure of Monopoly Power," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 55(2), pages 271-293.
    4. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Hakimov, Rustamdjan & Mueller, Juergen, 2014. "Marginal costs estimation and market power of German airports," Research in Transportation Economics, Elsevier, vol. 45(C), pages 42-48.

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    More about this item

    Keywords

    airport competition; counterveiling power; market power; substitution;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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