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(When) Do Hub Airlines Internalize Their Self-Imposed Congestion Delays?

Author

Listed:
  • Joseph I. Daniel

    () (Department of Economics, University of Delaware)

  • Katherine Thomas Harback

    (Mitre Corporation)

Abstract

We develop theoretical models of airport congestion with non-atomistic traffic and implement them empirically using data from twenty-seven major US airports to determine whether dominant airlines internalize or ignore self-imposed congestion. Estimates of minute-by-minute delay patterns at each airport calibrate structural models of landing and takeoff queues as dynamic functions of traffic rates and airport capacities. These functions determine the internal and external congestion that aircraft impose on one another. Specification tests largely reject the internalization model. Optimal pricing values all time using non-dominant aircraft cost coefficients and treats all delays as external—i.e., fees equal opportunity costs of allocating peak capacity to dominant airlines.

Suggested Citation

  • Joseph I. Daniel & Katherine Thomas Harback, 2005. "(When) Do Hub Airlines Internalize Their Self-Imposed Congestion Delays?," Working Papers 05-08, University of Delaware, Department of Economics.
  • Handle: RePEc:dlw:wpaper:05-08
    as

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    References listed on IDEAS

    as
    1. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1990. "Economics of a bottleneck," Journal of Urban Economics, Elsevier, vol. 27(1), pages 111-130, January.
    2. 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 327-370, March.
    3. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    4. 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.
    5. Daniel, Joseph I. & Pahwa, Munish, 2000. "Comparison of Three Empirical Models of Airport Congestion Pricing," Journal of Urban Economics, Elsevier, vol. 47(1), pages 1-38, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Hub-and-spoke airline networks; simulated annealing; commercial aviation; airline competition; airline mergers; airfares;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • D6 - Microeconomics - - Welfare Economics

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