Airport capacity and congestion when carriers have market power

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SSCI Scopus

Abstract

Several　authors　recently　pointed　out　that　congestion　pricing　has　no　(or　only　partial)　place　at　an　airport　when　carriers　have　market　power,　since　carriers　themselves　will　internalize　congestion.　This　article　investigates　the　impact　of　such　self-internalization　on　the　airport,　as　this　would　effectively　deprive　the　airport　of　an　important　source　of　funds　for　its　capacity　investment.　We　find　that　airline　market　structure　has　no　impact　on　airport　capacity　and　congestion　for　a　welfare-maximizing　airport　that　receives　public　subsidy,　while　somewhat　surprisingly,　both　a　private　airport　and　a　budget-constrained　public　airport　would　tend　to　over-invest　in　capacity　when　carriers　have　market　power.

Keyword

Author Community

[Anming Zhang] Sauder School of Business, University of British Columbia, 2053 Main Mall, Vancouver, BC, Canada V6T 1Z2

[Yimin Zhang] China Europe International Business School, 699 Hongfeng Road, Pudong, Shanghai 201206, China; City University of Hong Kong, Hong Kong