IDEAS home Printed from
   My bibliography  Save this article

Can market power be controlled by regulation of core prices alone? An empirical analysis of airport demand and car rental price


  • Czerny, Achim I.
  • Shi, Zijun
  • Zhang, Anming


Many firms offer “core” and “side” goods in the sense that side-good consumption is conditional on core-good consumption. Airports are a common example where the supply of runway and terminal capacity is the core good and the supply of various concession services (for example, car rental services) is the side good. While side-good supply can be responsible for a major share in total revenue, monopoly regulation typically concentrates on the control of core-good prices (“core prices” in short). Whether market power can indeed be effectively controlled by the regulation of core prices alone then depends on whether core-good consumption is a function of the price for side goods. This study empirically shows that a one-dollar increase in the daily car rental price reduces passenger demand at 199 US airports by more than 0.36%. A major implication of our findings is that for the case of airports, the effective control of market power may require regulation of both prices for core and side goods.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:transa:v:91:y:2016:i:c:p:260-272 DOI: 10.1016/j.tra.2016.06.022

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. David Starkie, 2001. "Reforming UK Airport Regulation," Journal of Transport Economics and Policy, University of Bath, vol. 35(1), pages 119-135, January.
    2. Forsyth, Peter, 2004. "Locational and monopoly rents at airports: creating them and shifting them," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 51-60.
    3. Flores-Fillol, Ricardo & Iozzi, Alberto & Valletti, Tommaso, 2014. "Platform pricing and consumer foresight: The case of airports," Working Papers 2072/242278, Universitat Rovira i Virgili, Department of Economics.
    4. Lin, Ming Hsin & Zhang, Anming, 2016. "Hub congestion pricing: Discriminatory passenger charges," Economics of Transportation, Elsevier, vol. 5(C), pages 37-48.
    5. 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.
    6. Zhang, Anming & Zhang, Yimin, 2003. "Airport charges and capacity expansion: effects of concessions and privatization," Journal of Urban Economics, Elsevier, vol. 53(1), pages 54-75, January.
    7. 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.
    8. Achim Czerny, 2006. "Price-cap Regulation of Airports: Single-till Versus Dual-till," Journal of Regulatory Economics, Springer, vol. 30(1), pages 85-97, July.
    9. Van Dender, Kurt, 2007. "Determinants of fares and operating revenues at US airports," Journal of Urban Economics, Elsevier, vol. 62(2), pages 317-336, September.
    10. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 287-296, December.
    11. Jan K. Brueckner & Darin N. Lee & Pierre M. Picard & Ethan Singer, 2015. "Product Unbundling in the Travel Industry: The Economics of Airline Bag Fees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 457-484, September.
    12. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    13. Tiziana D'Alfonso & Changmin Jiang & Yulai Wan, 2013. "Airport Pricing, Concession Revenues and Passenger Types," Journal of Transport Economics and Policy, University of Bath, vol. 47(1), pages 71-89, January.
    14. Tae Hoon Oum & Anming Zhang & Yimin Zhang, 2004. "Alternative Forms of Economic Regulation and their Efficiency Implications for Airports," Journal of Transport Economics and Policy, University of Bath, vol. 38(2), pages 217-246, May.
    15. Steven A. Morrison, 2001. "Actual, Adjacent, and Potential Competition Estimating the Full Effect of Southwest Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 239-256, May.
    16. Bracaglia, Valentina & D׳Alfonso, Tiziana & Nastasi, Alberto, 2014. "Competition between multiproduct airports," Economics of Transportation, Elsevier, vol. 3(4), pages 270-281.
    17. José Luis Montiel Olea & Carolin Pflueger, 2013. "A Robust Test for Weak Instruments," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(3), pages 358-369, July.
    18. Czerny, Achim I., 2013. "Public versus private airport behavior when concession revenues exist," Economics of Transportation, Elsevier, vol. 2(1), pages 38-46.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Kidokoro, Yukihiro & Lin, Ming Hsin & Zhang, Anming, 2016. "A general-equilibrium analysis of airport pricing, capacity, and regulation," Journal of Urban Economics, Elsevier, vol. 96(C), pages 142-155.

    More about this item


    Core goods; Side goods; Airport; Monopoly; Car rentals;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:91:y:2016:i:c:p:260-272. 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). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.