Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, October 15, 2010

Airport privatization and international competition

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.

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