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Competition between multiproduct airports

Author

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  • Bracaglia, Valentina
  • D׳Alfonso, Tiziana
  • Nastasi, Alberto

Abstract

We study airport competition when some types of commercial services, such as car parking or car rental, may be offered at the time of air ticket purchase through the Internet, in order to stimulate aviation demand. We find that airports set a lower aviation charge than they would have levied in the absence of concession services, when they are competing in online offers. Nevertheless, when only one airport pursues online offers, that facility sets a higher aviation charge than it would have levied in the absence of concession services, as long as profits from retail earned at the facility on the day of travel remain low enough. The Nash equilibrium of the game is such that both airports offer concession services online. This is welfare enhancing. Nevertheless, facilities might be caught in a Prisoner׳s Dilemma.

Suggested Citation

  • Bracaglia, Valentina & D׳Alfonso, Tiziana & Nastasi, Alberto, 2014. "Competition between multiproduct airports," Economics of Transportation, Elsevier, vol. 3(4), pages 270-281.
    • Handle: RePEc:eee:ecotra:v:3:y:2014:i:4:p:270-281
    DOI: 10.1016/j.ecotra.2015.02.004
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    4. Czerny, Achim I. & Shi, Zijun & Zhang, Anming, 2016. "Can market power be controlled by regulation of core prices alone? An empirical analysis of airport demand and car rental price," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 260-272.
    5. Jiang, Changmin & Zhang, Anming, 2015. "Airport congestion pricing and terminal investment: Effects of terminal congestion, passenger types, and concessionsAuthor-Name: Wan, Yulai," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 91-113.
    6. Koki Arai & Shuya Hayashi, 2021. "Business diversification and multifaceted markets," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 235-255, September.
    7. Czerny, Achim I. & Zhang, Hanxiang, 2020. "Rivalry between airport ancillary and city-center supplies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    8. Tiziana D'Alfonso & Valentina Bracaglia & Yulai Wan, 2015. "Airport cities and multiproduct pricing," DIAG Technical Reports 2015-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    9. Martin-Domingo, Luis & Martín, Juan Carlos, 2016. "Airport mobile internet an innovation," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 102-112.
    10. Achim I. Czerny & Anmin Zhang, 2015. "Single-Till versus Dual-Till Regulation of Airports," Tinbergen Institute Discussion Papers 15-049/VIII, Tinbergen Institute.
    11. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    12. Achim I. Czerny & Zijun Shi & Anming Zhang, 2015. "Can market power be controlled by regulation of core prices alone?: An empirical analysis of airport demand and car rental price," Tinbergen Institute Discussion Papers 15-041/VIII, Tinbergen Institute.
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    15. Choo, Yap Yin & Corbo, Leonardo & Wang, Kun, 2018. "Joint impact of airline market structure and airport ownership on airport market power and profit margin," Transport Policy, Elsevier, vol. 72(C), pages 67-78.

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