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A model of airport slot allocation with posted prices

Author

Listed:
  • Nicolas Gruyer

    () (LEEA (air transport economics laboratory), ENAC)

  • Kevin Guittet

    (DSNA/DTI/R&D)

Abstract

In this paper, we study the impact of the introduction of posted prices in the slot allocation process currently in use at congested airports in most European countries. In particular, we show that if the airport is initially saturated, while low level of slot prices entail no response from the airlines, requests for slots ”suddenly and violently” drop when the price reaches a certain threshold. In general, there is therefore no market clearing price for airport slots. We also present a dynamic model which highlights how the current grandfather rule - stating that slots used today are kept in the future - generates baby-sitting, that is airlines requiring and using slots today just because they expect them to be profitable in the future.

Suggested Citation

  • Nicolas Gruyer & Kevin Guittet, 2008. "A model of airport slot allocation with posted prices," Economics Working Papers 05, LEEA (air transport economics laboratory), ENAC (french national civil aviation school).
  • Handle: RePEc:enc:abcdef:airportslots5
    Note: Type of Document - pdf; pages: 31.
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    File URL: http://gruyern.free.fr/wpaper/gruyerguittet.pdf
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    References listed on IDEAS

    as
    1. Reynolds-Feighan, Aisling J. & Button, Kenneth J., 1999. "An assessment of the capacity and congestion levels at European airports," Journal of Air Transport Management, Elsevier, vol. 5(3), pages 113-134.
    2. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548.
    3. Ausubel Lawrence M & Milgrom Paul R, 2002. "Ascending Auctions with Package Bidding," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-44, August.
    4. Jean J. Gabszewicz & Sougata Poddar, 1997. "Demand fluctuations and capacity utilization under duopoly," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 131-146.
    5. Carlin, Alan & Park, Rolla Edward, 1970. "Marginal Cost Pricing of Airport Runway Capacity," American Economic Review, American Economic Association, vol. 60(3), pages 310-319, June.
    6. S.J. Rassenti & V.L. Smith & R.L. Bulfin, 1982. "A Combinatorial Auction Mechanism for Airport Time Slot Allocation," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 402-417, Autumn.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Capacity-constrained competition; airport slots;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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