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Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion

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  • Silva, Hugo E.
  • Verhoef, Erik T.
  • van den Berg, Vincent A.C.

Abstract

This paper analyzes efficient pricing at a congested airport dominated by a single firm. Unlike much of the previous literature, we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers. We show that a Stackelberg leader interacting with a competitive fringe partially internalizes congestion, and that there are various toll regimes that induce the welfare maximizing outcome, widening the set of choices for regulators. In particular, charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization, to both the leader and the fringe, yields the first-best outcome.

Suggested Citation

  • Silva, Hugo E. & Verhoef, Erik T. & van den Berg, Vincent A.C., 2014. "Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion," Journal of Urban Economics, Elsevier, vol. 80(C), pages 13-27.
  • Handle: RePEc:eee:juecon:v:80:y:2014:i:c:p:13-27
    DOI: 10.1016/j.jue.2013.08.002
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    Citations

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    Cited by:

    1. Small, Kenneth A., 2015. "The bottleneck model: An assessment and interpretation," Economics of Transportation, Elsevier, vol. 4(1), pages 110-117.
    2. Lindsey, Robin & de Palma, André & Silva, Hugo E., 2019. "Equilibrium in a dynamic model of congestion with large and small users," Transportation Research Part B: Methodological, Elsevier, vol. 124(C), pages 82-107.
    3. 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.
    4. Kenneth Small, 2015. "The Bottleneck Model: An Assessment and Interpretation," Working Papers 141506, University of California-Irvine, Department of Economics.
    5. Verhoef, Erik T., 2017. "Cost recovery of congested infrastructure under market power," Journal of Urban Economics, Elsevier, vol. 101(C), pages 45-56.
    6. Verhoef, Erik T. & Silva, Hugo E., 2017. "Dynamic equilibrium at a congestible facility under market power," Transportation Research Part B: Methodological, Elsevier, vol. 105(C), pages 174-192.
    7. Hugo E. Silva & Robin Lindsey & André de Palma & Vincent A. C. van den Berg, 2017. "On the Existence and Uniqueness of Equilibrium in the Bottleneck Model with Atomic Users," Transportation Science, INFORMS, vol. 51(3), pages 863-881, August.
    8. Czerny, Achim I. & Zhang, Anming, 2014. "Airport peak-load pricing revisited: The case of peak and uniform tolls," Economics of Transportation, Elsevier, vol. 3(1), pages 90-101.
    9. Li, Zhi-Chun & Huang, Hai-Jun & Yang, Hai, 2020. "Fifty years of the bottleneck model: A bibliometric review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 139(C), pages 311-342.

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    More about this item

    Keywords

    Airport pricing; Congestion; Bottleneck model;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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