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Airport congestion pricing and capacity: Cost recovery with per-flight or per-passenger charges

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  • Lin, Ming Hsin

Abstract

This study investigates congestion pricing and capacity investment for internationally interlinked airports considering cost recovery. Our global welfare maximization shows that “single pricing per-flight” or “single pricing per-passenger” could be sufficiently cost-recovering alternatives when first-best per-passenger subsidies are not feasible under “mix pricing (choosing per-flight and per-passenger charges).” However, each cost-recovering single-pricing method causes distortions, and single pricing per-flight is the smaller distortive. Our local welfare maximization shows similar results when per-passenger subsidies under mix pricing for each country are not feasible. Surprisingly, when each country's mix pricing does not require per-passenger subsidies, the distortions under cost-recovering single pricing per-flight may be smaller than those under cost-recovering mix pricing. However, each airport's capacity investment can be socially efficient only when single pricing per-passenger is adopted.

Suggested Citation

  • Lin, Ming Hsin, 2025. "Airport congestion pricing and capacity: Cost recovery with per-flight or per-passenger charges," Economics of Transportation, Elsevier, vol. 42(C).
    • Handle: RePEc:eee:ecotra:v:42:y:2025:i:c:s2212012225000188
    DOI: 10.1016/j.ecotra.2025.100410
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    More about this item

    Keywords

    Internationally interlinked airport; per-flight charge; per-passenger charge; Cost recovery; Local welfare maximization;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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