Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86834
Authors: 
Verhoef, Erik T.
Year of Publication: 
2008
Series/Report no.: 
Tinbergen Institute Discussion Paper 08-030/3
Abstract: 
This paper studies the regulation of an airline duopoly on a congested airport. Regulation should then address two market failures: uninternalized congestion, and overpricing due to market power. We find that first-best charges are differentiated over airlines if asymmetric, and completely drive out the least efficient airline from the market. This is not generally the case for an undifferentiated charge, which is found to be a weighted average of first-best charge rules for the two airlines, and is less-than-optimally efficient because of its inability to differentiate between them. Tradeable slots may yield the first-best outcome if the congestion externality is relatively important and the market power distortion relatively unimportant, but may be less efficient than non-intervention when the reverse is true.
Subjects: 
Airport congestion
congestion pricing
slot trading
tradeable permits
second-best
JEL: 
R41
R48
D62
Document Type: 
Working Paper

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