Thursday, January 10, 2013
Posted by D. Daniel Sokol
Toshihiro Matsumura, University of Tokyo - Institute of Social Science and Noriaki Matsushima, Osaka University - Institute of Social and Economic Research describe Airport Privatization and International Competition.
ABSTRACT: We provide a simple theoretical model to explain the mechanism whereby the privatization of international airports can improve welfare. The model consists of a downstream (airline) duopoly with two inputs (landings at two airports) and two types of consumers. The airline companies compete internationally. We show that the outcome in which both airports are privatized is always an equilibrium, whereas that in which no airport is privatized is an equilibrium only if the degree of product differentiation is large. We also discuss airport congestion problems within the model framework.