Airport Congestion Pricing When Airlines Price Discriminate
This paper develops a tractable model of third-degree price discrimination in airline markets that features two types of passengers with different time valuations, carriers in Cournot competition and a congested infrastructure. We find that price discrimination always leads to a loss of social welfare when, in the first stage, the congestion charge is chosen to maximize welfare by incorporating carriers’ behavior in the second stage. We also show that the welfare loss can be small if, in the process of choosing the optimal airport charges, carriers were treated as atomistic.
|Date of creation:||Jan 2012|
|Publication status:||Published Transportation Research Part B: Methodological, Volume 65, July 2014, Pages 77–89|
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