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Pricing vs. slot policies when airport profits matter

  • Basso, Leonardo J.
  • Zhang, Anming
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    This paper analyzes pricing and slot-allocation mechanisms to manage airport capacity when profits are important to an airport, owing to budget constraints or profit maximization. We find that congestion pricing and slot trading/slot auctioning do not lead to the same results. Total traffic is higher under slot auctions than under congestion pricing. Furthermore, if airport profits matter just marginally, then slot auctions will outperform congestion pricing in terms of achieving a higher objective-function value. On the other hand, if airport profits matter sufficiently highly, which mechanism is better is then very much dependent on parameter values. In particular, congestion pricing may be strongly preferred over slot auctions for certain parameter values. The impact of congestion-remedy mechanisms on individual carriers is also examined.

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    Article provided by Elsevier in its journal Transportation Research Part B: Methodological.

    Volume (Year): 44 (2010)
    Issue (Month): 3 (March)
    Pages: 381-391

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    Handle: RePEc:eee:transb:v:44:y:2010:i:3:p:381-391
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    1. Czerny, Achim I., 2010. "Airport congestion management under uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 371-380, March.
    2. David Starkie, 2001. "Reforming UK Airport Regulation," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 35(1), pages 119-135, January.
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    5. 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.
    6. Basso, Leonardo J. & Zhang, Anming, 2008. "On the relationship between airport pricing models," Transportation Research Part B: Methodological, Elsevier, vol. 42(9), pages 725-735, November.
    7. Basso, Leonardo J., 2008. "Airport deregulation: Effects on pricing and capacity," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 1015-1031, July.
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    9. Brueckner, Jan K., 2009. "Price vs. quantity-based approaches to airport congestion management," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 681-690, June.
    10. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    11. 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.
    12. 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 327-70, March.
    13. Ian Jones & Ivan Viehoff & Phillipa Marks, 1993. "The economics of airport slots," Fiscal Studies, Institute for Fiscal Studies, vol. 14(4), pages 37-57, November.
    14. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
    15. 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.
    16. Zhang, Anming & Zhang, Yimin, 2006. "Airport capacity and congestion when carriers have market power," Journal of Urban Economics, Elsevier, vol. 60(2), pages 229-247, September.
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