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The effects of concession revenue sharing contracts in airport competition

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  • Nerja, Adrián
  • Sánchez, Mariola

Abstract

This paper studies the effects of concession revenue sharing contracts to analyze how airport-airline vertical structures compete for passengers in the same catchment area. The analysis studies the effects of such contracts depending on airport ownership structure. We show that private airports tend to share less concession revenues than public ones eventually leading to lower welfare levels. These results have relevant policy implications when concession revenue sharing contracts are specified in practice.

Suggested Citation

  • Nerja, Adrián & Sánchez, Mariola, 2020. "The effects of concession revenue sharing contracts in airport competition," MPRA Paper 119160, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:119160
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    References listed on IDEAS

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    1. Barbot, Cristina & D’Alfonso, Tiziana & Malighetti, Paolo & Redondi, Renato, 2013. "Vertical collusion between airports and airlines: An empirical test for the European case," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 57(C), pages 3-15.
    2. Hangjun Yang & Anming Zhang & Xiaowen Fu, 2015. "Determinants of Airport-Airline Vertical Arrangements: Analytical Results and Empirical Evidence," Journal of Transport Economics and Policy, University of Bath, vol. 49(3), pages 438-453, July.
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    4. Basso, Leonardo J. & Zhang, Anming, 2008. "On the relationship between airport pricing models," Transportation Research Part B: Methodological, Elsevier, vol. 42(9), pages 725-735, November.
    5. Alderighi, Marco & Cento, Alessandro & Nijkamp, Peter & Rietveld, Piet, 2012. "Competition in the European aviation market: the entry of low-cost airlines," Journal of Transport Geography, Elsevier, vol. 24(C), pages 223-233.
    6. Ricardo Flores‐Fillol & Alberto Iozzi & Tommaso Valletti, 2018. "Platform pricing and consumer foresight: The case of airports," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 705-725, October.
    7. Xiaowen Fu & Anming Zhang, 2010. "Effects of Airport Concession Revenue Sharing on Airline Competition and Social Welfare," Journal of Transport Economics and Policy, University of Bath, vol. 44(2), pages 119-138, May.
    8. D’Alfonso, Tiziana & Nastasi, Alberto, 2012. "Vertical relations in the air transport industry: A facility-rivalry game," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 993-1008.
    9. Cristina Barbot, 2011. "Vertical Contracts between Airports and Airlines Is there a Trade-off between Welfare and Competitiveness?," Journal of Transport Economics and Policy, University of Bath, vol. 45(2), pages 277-302, May.
    10. Barbot, Cristina & D'Alfonso, Tiziana, 2014. "Why do contracts between airlines and airports fail?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 34-41.
    11. Saraswati, Batari & Hanaoka, Shinya, 2014. "Airport–airline cooperation under commercial revenue sharing agreements: A network approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 17-33.
    12. 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.
    13. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 287-296, December.
    14. Barbot, Cristina, 2009. "Airport and airlines competition: Incentives for vertical collusion," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 952-965, December.
    15. Czerny, Achim I., 2013. "Public versus private airport behavior when concession revenues exist," Economics of Transportation, Elsevier, vol. 2(1), pages 38-46.
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    Citations

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    Cited by:

    1. Nerja, Adrián, 2023. "Can parallel airline alliances be welfare improving? The case of airline–airport vertical agreement," Transportation Research Part A: Policy and Practice, Elsevier, vol. 167(C).
    2. Kidokoro, Yukihiro & Zhang, Anming, 2023. "Single-till regulation, dual-till regulation, and regulatory capture: When does a regulatory authority favor single-till regulation over dual-till regulation?," Economics of Transportation, Elsevier, vol. 33(C).

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    More about this item

    Keywords

    Revenue sharing contracts; Airport competition; Concession revenues; Airportairline vertical cooperation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other

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