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

Author

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  • Davide Scotti

  • 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 Management, Information and Production Engineering, University of Bergamo.
    • Handle: RePEc:brh:wpaper:1004
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    File URL: http://hdl.handle.net/10446/636
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    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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