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Competition in complementary goods: Airport handling markets and Council Directive 96/67/EC

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  • Maria Cristina Barbot

    ()
    (CEF.UP, Faculdade de Economia, Universidade do Porto)

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    Abstract

    This paper addresses the case of complementary services with vertical relations. Using the example of airport handling activities, we develop a model to investigate the effects on welfare and competitiveness of four different handling market situations. We find out that the usual Cournot result on welfare when firms compete in complementary goods is verified unless there are efficiency gaps between the firms, or if vertically related firms also compete on the same market. We also find that the presence of a horizontally integrated firm may lead to market foreclosure. Moreover, we add a few remarks on regulatory issues, where we show that regulation may be pointless or even anti-competitive. In particular, we show that Council Directive 96/67/EC, while intending to increase competition, may lead to anti-competitive situations and consumers surplus decreases.

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    Bibliographic Info

    Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1001.

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    Length: 25 pages
    Date of creation: Feb 2010
    Date of revision:
    Handle: RePEc:por:cetedp:1001

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    Keywords: Complementary goods competition; airport handling; vertical relations.;

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