Pontificia Universidad Católica de Chile Pontificia Universidad Católica de Chile
Silva, Hugo E., Erik T. Verhoef, Vincent A.C. van den Berg. 2014. “Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion” Journal of Urban Economics, 80:13-27. (2014)

Airlines’ strategic interactions and airport pricing in a dynamic bottleneck model of congestion

Revista : Journal of Urban Economics
Volumen : 80
Páginas : 13-27
Tipo de publicación : Publicaciones WOS sin afiliación UC Ir a publicación

Abstract

This paper analyzes efficient pricing at a congested airport dominated by a single firm. Unlike much of the previous literature, we combine a dynamic bottleneck model of congestion and a vertical structure model that explicitly considers the role of airlines and passengers. We show that a Stackelberg leader interacting with a competitive fringe partially internalizes congestion, and that there are various toll regimes that induce the welfare maximizing outcome, widening the set of choices for regulators. In particular, charging the congestion toll that would apply for fully competitive carriers and that ignores any internalization, to both the leader and the fringe, yields the first-best outcome.