Friday, October 15, 2010
Posted by D. Daniel Sokol
Toshihiro Matsumura (University of Tokyo) and Noriaki Matsushima (Osaka University) address Airport privatization and international competition.
ABSTRACT: We provide a simple theoretical model to explain the mechanism wherebyprivatization of international airports can improve welfare. The model consists of a downstream (airline) duopoly with two inputs (landings at two airports) andtwo types of consumers. The airline companies compete internationally. Using thesimple international duopoly model, we show that the outcome where both airportsare privatized is always an equilibrium while that where no airport is privatized is another equilibrium only if the degree of product differentiation is large.