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Sequential peak-load pricing: the case of airports and airlines

Author

Listed:
  • Leonardo J. Basso
  • Anming Zhang

Abstract

We investigate airport peak-load pricing using a vertical structure of airport and airlines. We find that a profit-maximizing airport would charge higher peak and off-peak runway prices and a higher peak/off-peak price differential than a public airport. Consequently, airport privatization would lead to both fewer total passengers and fewer passengers in the peak period. Although peak-travelling passengers benefit from fewer delays, this low level of peak congestion is not efficient, suggesting that airport privatization cannot be judged based on its effect on congestion alone. We also examine pricing behaviour of a public airport constrained to charge a time independent price.

Suggested Citation

  • Leonardo J. Basso & Anming Zhang, 2008. "Sequential peak-load pricing: the case of airports and airlines," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 1087-1119, August.
  • Handle: RePEc:cje:issued:v:41:y:2008:i:3:p:1087-1119
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    Citations

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    Cited by:

    1. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    2. repec:bla:revurb:v:29:y:2017:i:1:p:2-17 is not listed on IDEAS
    3. Matsushima, Noriaki & Takauchi, Kazuhiro, 2014. "Port privatization in an international oligopoly," Transportation Research Part B: Methodological, Elsevier, vol. 67(C), pages 382-397.
    4. Volodymyr Bilotkach & Joseph Clougherty & Juergen Mueller & Anming Zhang, 2012. "Regulation, privatization, and airport charges: panel data evidence from European airports," Journal of Regulatory Economics, Springer, vol. 42(1), pages 73-94, August.
    5. Bilotkach, Volodymyr & Mueller, Juergen, 2012. "Supply side substitutability and potential market power of airports: Case of Amsterdam Schiphol," Utilities Policy, Elsevier, vol. 23(C), pages 5-12.
    6. Basso, Leonardo J. & Guevara, Cristián Angelo & Gschwender, Antonio & Fuster, Marcelo, 2011. "Congestion pricing, transit subsidies and dedicated bus lanes: Efficient and practical solutions to congestion," Transport Policy, Elsevier, vol. 18(5), pages 676-684, September.
    7. Achim I. Czerny, 2009. "Airport Pricing and Concession Revenues," WHU Working Paper Series - Economics Group 09-05, WHU - Otto Beisheim School of Management.
    8. Akio Kawasaki, 2013. "Airport privatization competition including domestic airline networks," Working Papers e64, Tokyo Center for Economic Research.
    9. repec:eee:transb:v:105:y:2017:i:c:p:174-192 is not listed on IDEAS

    More about this item

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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