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Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil

  • Christopher Mayer
  • Todd Sinai

We examine two factors that explain air traffic congestion: network benefits due to hubbing and congestion externalities. While both factors impact congestion, we find that the hubbing effect dominates empirically. Hub carriers incur most of the additional travel time from hubbing, primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time. Non-hub flights at the same hub airports operate with minimal additional travel time. These results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports. (JEL L2, L5, L9, D6)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282803769206269
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 4 (September)
Pages: 1194-1215

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:4:p:1194-1215
Note: DOI: 10.1257/000282803769206269
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  1. Encacoua, D. & Moreaux, M. & Perrot, A., 1995. "Compatibility and Competition in Airlines: Demand Side Network Effect," Papiers d'Economie Mathématique et Applications 95.21, Université Panthéon-Sorbonne (Paris 1).
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  12. Hendricks, Ken & Piccione, Michele & Tan, Guofu, 1995. "The Economics of Hubs: The Case of Monopoly," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 83-99, January.
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  15. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  16. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-70, March.
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