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The impact of airport competition on technical efficiency: A Stochastic Frontier Analysis applied to Italian airports

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  • Davide Scotti

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  • Paolo Malighetti
  • Gianmaria Martini
  • Nicola Volta

Abstract

We investigate how the intensity of competition among airports affects their technical efficiency by computing airports’ markets on the basis of a potential demand approach. We find that the intensity of competition has a negative impact on airports’ efficiency in Italy during the 2005–2008 period. This implies that airports belonging to a local air transportation system where competition is strong exploit their inputs less intensively than do airports with local monopoly power. Furthermore, we find that public airports are more efficient than private and mixed ones. Since public airports take into account the positive externalities created by air transportation in the local economy, they are more willing to subsidize airlines in developing the airports’ connections. Hence, policy makers should provide incentives to implement airports’ specialization in local systems where competition is strong. Moreover, when regulating airport charges, they should take into account the impact of the above externalities.

Suggested Citation

  • Davide Scotti & Paolo Malighetti & Gianmaria Martini & Nicola Volta, 2010. "The impact of airport competition on technical efficiency: A Stochastic Frontier Analysis applied to Italian airports," Working Papers 1004, Department of Economics and Technology Management, University of Bergamo.
  • Handle: RePEc:brh:wpaper:1004
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    2. Mancuso, Paolo, 2014. "An analysis of the competition that impinges on the Milan–Rome intercity passenger transport link," Transport Policy, Elsevier, pages 42-52.
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    4. Tiziana DíAlfonso & Cinzia Daraio & Alberto Nastasi, 2013. "Assesing the Impact of Competition on the Efficiency of Italian Airports," DIAG Technical Reports 2013-01, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    5. D’Alfonso, Tiziana & Daraio, Cinzia & Nastasi, Alberto, 2015. "Competition and efficiency in the Italian airport system: new insights from a conditional nonparametric frontier analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 80(C), pages 20-38.
    6. De Luca, Mario & Dell'Acqua, Gianluca, 2014. "Runway surface friction characteristics assessment for Lamezia Terme airfield pavement management system," Journal of Air Transport Management, Elsevier, vol. 34(C), pages 1-5.
    7. Chang, Young-Tae & (Kevin) Park, Hyosoo & Zou, Bo & Kafle, Nabin, 2016. "Passenger facility charge vs. airport improvement program funds: A dynamic network DEA analysis for U.S. airport financing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 88(C), pages 76-93.
    8. Zhang, Baocheng & Wu, Hao & Yang, Xinsheng & Zhai, Wenpeng & Xia, Qingjun & Li, Yafei, 2014. "An estimation of returns to scale of airport airsides under multiple optimal solutions in DEA," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 149-156.
    9. Itani, Nadine & O’Connell, John F. & Mason, Keith, 2015. "Towards realizing best-in-class civil aviation strategy scenarios," Transport Policy, Elsevier, pages 42-54.
    10. Michelle Phillips, 2013. "Inefficiency in Japanese water utility firms: a stochastic frontier approach," Journal of Regulatory Economics, Springer, vol. 44(2), pages 197-214, October.
    11. De Nicola, Arianna & Gitto, Simone & Mancuso, Paolo, 2013. "Airport quality and productivity changes: A Malmquist index decomposition assessment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 58(C), pages 67-75.
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    13. Pavlyuk, Dmitry, 2016. "Implication of spatial heterogeneity for airports' efficiency estimation," Research in Transportation Economics, Elsevier, vol. 56(C), pages 15-24.
    14. Pavlyuk, Dmitry, 2012. "Airport Benchmarking and Spatial Competition: a Critical Review," MPRA Paper 43391, University Library of Munich, Germany.
    15. repec:eee:transa:v:101:y:2017:i:c:p:61-72 is not listed on IDEAS
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    17. Tsionas, Efthymios & Assaf, A. George & Gillen, David & Mattila, Anna S., 2017. "Modeling technical and service efficiency," Transportation Research Part B: Methodological, Elsevier, vol. 96(C), pages 113-125.
    18. Rolim, Paula S.W. & Bettini, Humberto F.A.J. & Oliveira, Alessandro V.M., 2016. "Estimating the impact of airport privatization on airline demand: AÂ regression-based event study," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 31-41.
    19. Chen, Zhongfei & Barros, Carlos & Yu, Yanni, 2017. "Spatial distribution characteristic of Chinese airports: A spatial cost function approach," Journal of Air Transport Management, Elsevier, vol. 59(C), pages 63-70.
    20. Ayadi, Ahmed & Hammami, Sami, 2015. "An analysis of the performance of public bus transport in Tunisian cities," Transportation Research Part A: Policy and Practice, Elsevier, vol. 75(C), pages 51-60.
    21. Bettini, Humberto F.A.J. & Oliveira, Alessandro V.M., 2016. "Two-sided platforms in airport privatization," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 262-278.
    22. Abbruzzo, Antonino & Fasone, Vincenzo & Scuderi, Raffaele, 2016. "Operational and financial performance of Italian airport companies: A dynamic graphical model," Transport Policy, Elsevier, pages 231-237.

    More about this item

    Keywords

    Airport efficiency; stochastic distance function; airport competition;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other

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