Airport Congestion When Carriers Have Market Power
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- 1 November 2002
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 92 (5) , 1357-1375
- https://doi.org/10.1257/000282802762024548
Abstract
This paper analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power. The analysis shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions. Under a Cournot oligopoly, however, carriers are shown to internalize only the congestion they impose on themselves. A toll that captures the uninternalized portion of congestion may then improve the allocation of traffic. The analysis is supported by some rudimentary empirical evidence.Keywords
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