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The assessment of market power of hub airports

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  • Polk, Andreas
  • Bilotkach, Volodymyr

Abstract

Airport regulation regimes are under revision in many countries. The decision about the extent of airport regulation is based on an economic analysis of market power, which is done in two steps. The first step involves defining the relevant markets the airport is operating on. This in turn is based on an economic analysis of the particular circumstances of the airport, and must be compatible with competition law. The second step consists of the evaluation of the airport's competitive position in all identified markets. Due to industry particularities, many diverse issues must be taken into account in this process, such as questions of upstream and downstream market interaction, airport congestion, peak-load pricing, or offsetting bargaining power. Many of these questions have been theoretically analyzed in the industrial organization literature, but have only rarely been applied in practical competition analysis with respect to airports. This paper builds a bridge between the theoretical insights and their practical application to airport regulation policy. We derive the principles for a sound economic analysis of the market power of airports, given the time and data constraints encountered in practice by the regulatory authorities and other involved parties, and propose a general framework for the analysis of market power of airports. We focus on hub airports, as the analysis of these gateways covers all the relevant issues, including countervailing power of the hub operator.

Suggested Citation

  • Polk, Andreas & Bilotkach, Volodymyr, 2013. "The assessment of market power of hub airports," Transport Policy, Elsevier, vol. 29(C), pages 29-37.
  • Handle: RePEc:eee:trapol:v:29:y:2013:i:c:p:29-37
    DOI: 10.1016/j.tranpol.2013.03.004
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    References listed on IDEAS

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    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
    2. 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.
    3. Ian Dobbs, 2006. "Defining Markets for Ex Ante Regulation using the Hypothetical Monopoly Test," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 83-109.
    4. Gillen, David, 2011. "The evolution of airport ownership and governance," Journal of Air Transport Management, Elsevier, vol. 17(1), pages 3-13.
    5. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    6. 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.
    7. Volodymyr Bilotkach, 2007. "Asymmetric Regulation and Airport Dominance in International Aviation: Evidence from the London-new York Market," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 505-523, October.
    8. Christopher Mayer & Todd Sinai, 2003. "Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil," American Economic Review, American Economic Association, vol. 93(4), pages 1194-1215, September.
    9. Forsyth, Peter, 2001. "Promoting trade in airline services," Journal of Air Transport Management, Elsevier, vol. 7(1), pages 43-50.
    10. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    11. Ivaldi Marc & Lőrincz Szabolcs, 2011. "Implementing Relevant Market Tests in Antitrust Policy: Application to Computer Servers," Review of Law & Economics, De Gruyter, vol. 7(1), pages 29-71, April.
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    Citations

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    Cited by:

    1. Wissner, Matthias, 2014. "Regulation of district-heating systems," Utilities Policy, Elsevier, vol. 31(C), pages 63-73.
    2. repec:eee:jaitra:v:67:y:2018:i:c:p:63-71 is not listed on IDEAS
    3. repec:eee:trapol:v:59:y:2017:i:c:p:28-37 is not listed on IDEAS
    4. Achim I. Czerny & Anmin Zhang, 2015. "Single-Till versus Dual-Till Regulation of Airports," Tinbergen Institute Discussion Papers 15-049/VIII, Tinbergen Institute.
    5. Scarpel, Rodrigo Arnaldo, 2014. "A demand trend change early warning forecast model for the city of São Paulo multi-airport system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 65(C), pages 23-32.

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