Antitrust & Competition Policy Blog

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

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Thursday, March 10, 2011

Airport Congestion Pricing and its Welfare Implications: The Case of Variable Passenger Time Costs

Posted by D. Daniel Sokol

Andrew Yuen, Chinese University of Hong Kong (CUHK) and Anming Zhang, University of British Columbia - Sauder School of Business explore Airport Congestion Pricing and its Welfare Implications: The Case of Variable Passenger Time Costs.

ABSTRACT: This paper develops an analytical framework for airport congestion pricing by considering variable passenger time costs. We find that, first, congestion delays will not be fully internalized at the carrier level under different market structures, including those airports dominated by a monopoly airline. Therefore, congestion pricing is necessary regardless of the market structures. Second, although congestion pricing is welfare-improving, it may not be Pareto-improving. This might explain why congestion pricing is unpopular in the real world.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/03/airport-congestion-pricing-and-its-welfare-implications-the-case-of-variable-passenger-time-costs.html

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