Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111720
Authors: 
Czerny, Achim I.
Shi, Zijun
Zhang, Anming
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-041/VIII
Abstract: 
Many firms offer “core” and “side” goods in the sense that side-good consumption is conditional on core-good consumption. Airports are a common example where the supply of runway and terminal capacity is the core good and the supply of various concession services (for example, car rental services) is the side good. While side-good supply can be responsible for a major share in total revenue, monopoly regulation typically concentrates on the control of core-good prices (“core prices” in short). Whether market power can indeed be effectively controlled by the regulation of core prices alone then depends on whether core-good consumption is a function of the price for side goods. This study empirically shows that a one-dollar increase in the daily car rental price reduces passenger demand at 199 US airports by more than 0.36 percent. A major implication of our findings is that for the case of airports, the effective control of market power may require regulation of both prices for core and side goods.
Subjects: 
Core goods
side goods
airport
monopoly
car rentals
JEL: 
L12
L43
L93
Document Type: 
Working Paper

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