Do carriers internalize congestion costs? Empirical evidence on the internalization question
Economists have long suggested overhauling the existing U.S. airport landing/departure fees to reflect market valuations of scarce runway capacity. Economists, however, do not agree on the optimal congestion-based pricing scheme. While some researchers advocate for a uniform congestion fee regardless of a carrier's airport market share, others suggest that airport tolls should only reflect the congestion costs imposed on other carriers. This paper uses ten years of ontime performance data to empirically determine if carriers internalize congestion costs. While previous researchers (e.g., [Mayer, Christopher, Sinai, Todd, 2003a. Network effects, congestion externalities, and air traffic delays: Or why all delays are not evil. American Economic Review 93 (4), 1194-1215]) use "excess travel time" to measure flight delays, the contribution of this paper is the addition of on-time arrival and delay measures based on actual versus scheduled arrival and departure times. We find that estimates based on these new delay measures reverse earlier findings by Mayer and Sinai [2003a. Network effects, congestion externalities, and air traffic delays: Or why all delays are not evil. American Economic Review 93 (4), 1194-1215] and hence imply that carriers are not internalizing flight congestion costs.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ito, Harumi & Lee, Darin, 2005.
"Assessing the impact of the September 11 terrorist attacks on U.S. airline demand,"
Journal of Economics and Business,
Elsevier, vol. 57(1), pages 75-95.
- Harumi Ito & Darin Lee, 2003. "Assessing the Impact of the September 11 Terrorist Attacks on U.S. Airline Demand," Working Papers 2003-16, Brown University, Department of Economics.
- Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
- Eric Pels & Erik Verhoef, 2003. "The Economics of Airport Congestion Pricing," Tinbergen Institute Discussion Papers 03-083/3, Tinbergen Institute.
- Brueckner, Jan K., 2005. "Internalization of airport congestion: A network analysis," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 599-614, September.
- Jan K. Brueckner, 2002. "Internalization of Airport Congestion: A Network Analysis," CESifo Working Paper Series 756, CESifo Group Munich.
- Brueckner, Jan K. & Van Dender, Kurt, 2008. "Atomistic congestion tolls at concentrated airports? Seeking a unified view in the internalization debate," Journal of Urban Economics, Elsevier, vol. 64(2), pages 288-295, September.
- Jan K. Brueckner & Kurt Van Dender, 2007. "Atomistic Congestion Tolls at Concentrated Airports? Seeking a Unified View in the Internalization Debate," CESifo Working Paper Series 2033, CESifo Group Munich.
- Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July.
- Suzuki, Yoshinori, 2000. "The relationship between on-time performance and airline market share: a new approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 36(2), pages 139-154, June.
- Vansteenwegen, P. & Van Oudheusden, D., 2007. "Decreasing the passenger waiting time for an intercity rail network," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 478-492, May.
- 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 327-370, March.
- Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2003. "Access to and competition between airports: a case study for the San Francisco Bay area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(1), pages 71-83, January.
- Sandford F. Borins, 1978. "Pricing and Investment in a Transportation Network: The Case of Toronto Airport," Canadian Journal of Economics, Canadian Economics Association, vol. 11(4), pages 680-700, November.
- Forbes, Silke J., 2008. "The effect of air traffic delays on airline prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1218-1232, September.
- Michael Mazzeo, 2003. "Competition and Service Quality in the U.S. Airline Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(4), pages 275-296, June.
- Brueckner, Jan K. & Pai, Vivek, 2009. "Technological innovation in the airline industry: The impact of regional jets," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 110-120, January.
- Jan K. Brueckner & Vivek Pai, 2007. "Technological Innovation in the Airline Industry: The Impact of Regional Jets," Working Papers 060720, University of California-Irvine, Department of Economics.
- Bhat, Chandra R. & Sardesai, Rupali, 2006. "The impact of stop-making and travel time reliability on commute mode choice," Transportation Research Part B: Methodological, Elsevier, vol. 40(9), pages 709-730, November.
- Small, Kenneth A, 1982. "The Scheduling of Consumer Activities: Work Trips," American Economic Review, American Economic Association, vol. 72(3), pages 467-479, June.
- Wardman, Mark, 2004. "Public transport values of time," Transport Policy, Elsevier, vol. 11(4), pages 363-377, October.
- Nicholas G. Rupp & George M. Holmes, 2006. "An Investigation into the Determinants of Flight Cancellations," Economica, London School of Economics and Political Science, vol. 73(292), pages 749-783, November.
- Levine, Michael E, 1969. "Landing Fees and the Airport Congestion Problem," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 79-108, April.
- Morrison, Steven A. & Winston, Clifford, 2008. "The effect of FAA expenditures on air travel delays," Journal of Urban Economics, Elsevier, vol. 63(2), pages 669-678, March.
- Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
- Daniel, Joseph I. & Harback, Katherine Thomas, 2008. "(When) Do hub airlines internalize their self-imposed congestion delays?," Journal of Urban Economics, Elsevier, vol. 63(2), pages 583-612, March.
- Joseph I. Daniel & Katherine Thomas Harback, 2005. "(When) Do Hub Airlines Internalize Their Self-Imposed Congestion Delays?," Working Papers 05-08, University of Delaware, Department of Economics.
- Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, vol. 60(3), pages 310-319, June.
- Steven A. Morrison & Clifford Winston, 2007. "Another Look at Airport Congestion Pricing," American Economic Review, American Economic Association, vol. 97(5), pages 1970-1977, December.
- Daniel, Joseph I., 2001. "Distributional Consequences of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 50(2), pages 230-258, September.
- Daniel, Joseph I. & Pahwa, Munish, 2000. "Comparison of Three Empirical Models of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 47(1), pages 1-38, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:65:y:2009:i:1:p:24-37. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.