Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87242
Authors: 
Silva, Hugo E.
Verhoef, Erik T.
van den Berg, Vincent A.C.
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-056/3
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 when a Stackelberg leader interacts with a competitive fringe, charging the congestion toll that is derived for fully atomistic carriers to both leader and fringe yields the first-best outcome. This holds regardless of the leader's internalization of congestion in the unregulated equilibrium, and regardless of the assumed demand substitution pattern between firms. This result implies that the financial deficit under optimal pricing may be less severe than what earlier studies suggest. Finally, we show that there are various alternative toll regimes that also induce the welfare maximizing outcome, and therefore widen the set of choices for regulators.
Subjects: 
Airport pricing
Congestion
Bottleneck model
JEL: 
H23
L50
L93
R48
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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