Vertical Contracts between Airports and Airlines: is there a Trade-off between Welfare and Competitiveness?
AbstractAirports and airlines have been increasingly establishing vertical contracts, which have a wide variety of forms. These contracts have important implications for policy issues, namely for regulation and price discrimination legislation. In this paper we develop a model to analyse the effects of three types of vertical contracts, in what regards welfare, pro-competitiveness and the scope for regulation. We find that two types of contracts are anti-competitive, and that in all of them consumers are better-off, though in one of them within conditions regarding operational efficiency. We also conclude that regulation may (or may not) improve welfare depending on the type of contract and that price capping has different effects according to the facility the price of which is capped. Moreover, we find that these agreement’s effects exhibit a trade-off between pro-competitiveness and welfare and between price discrimination and welfare.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0901.
Length: 26 pages
Date of creation: Jan 2009
Date of revision:
vertical contracts; regulation; airports; airlines.;
Find related papers by JEL classification:
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-17 (All new papers)
- NEP-COM-2009-01-17 (Industrial Competition)
- NEP-CSE-2009-01-17 (Economics of Strategic Management)
- NEP-MIC-2009-01-17 (Microeconomics)
- NEP-REG-2009-01-17 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Comanor, William S & Frech, H E, III, 1985. "The Competitive Effects of Vertical Agreements?," American Economic Review, American Economic Association, vol. 75(3), pages 539-46, June.
- Cruz, Carlos & Marques, Rui, 2010.
"Contribution to the study of PPP arrangements in airport development, management and operation,"
24623, University Library of Munich, Germany.
- Cruz, Carlos Oliveira & Marques, Rui Cunha, 2011. "Contribution to the study of PPP arrangements in airport development, management and operation," Transport Policy, Elsevier, vol. 18(2), pages 392-400, March.
- Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
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