Market power and the need for regulation in the German airport market
AbstractWith 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.
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Bibliographic InfoPaper provided by Institute of Transport Economics, University of Muenster in its series Working Papers with number 10.
Length: 37 pages
Date of creation: Oct 2005
Date of revision: Mar 2006
airport competition; counterveiling power; market power; substitution;
Find related papers by JEL classification:
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Systems - - - Government Pricing and Policy
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-COM-2006-05-06 (Industrial Competition)
- NEP-CSE-2006-05-06 (Economics of Strategic Management)
- NEP-MIC-2006-05-06 (Microeconomics)
- NEP-REG-2006-05-06 (Regulation)
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