Grandfather rights in the market for airport slots
Grandfather rights are currently used in the European Union to allocate airport slots. This article shows that airports prefer such a use-it-or-lose-it rule to unconditional property rights. Assuming that there are informational asymmetries between airports and air carriers because air carriers have better information on passenger demand, the use-it-or-lose-it rule increases slot use when demand for air transport is low. Airport profits increase and those of the air carriers, together with social welfare, decrease. The profit-maximizing slot-use ratio is less than one.
Volume (Year): 44 (2010)
Issue (Month): 1 (January)
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