L12 Monopoly; Monopolization Strategies
Refine
Document Type
- Working Paper (2)
Language
- English (2)
Has Fulltext
- yes (2)
Is part of the Bibliography
- no (2)
Keywords
- Congestion (2)
- Pricing (2)
- Stauung (2)
- Airlines (1)
- Airport (1)
- Airports (1)
- Autovermietung (1)
- Car rental (1)
- Concession (1)
- Dienstleistung (1)
Institute
This paper considers a congested airport that provides aeronautical services to airlines and concessions to retailers or, respectively, car rental companies. It is shown that airport retailers exert downward pressure on the private aeronautical charge. On the other hand, the effect of car rentals on the private aeronautical charge is ambiguous. By contrast, the first-best airfare and aeronautical charge are independent of retail profits, while they are positively related to car rentals. Finally, the comparison of private and welfare-oriented airport behavior shows that private behavior can lead to the welfare-optimal outcome when commercial services exist.
We consider a public and congested airport served by airlines that may have market power, and two types of travelers with different relative values of time. We find that in the absence of passenger-type-based price discrimination by airlines, it can be useful to increase the airport charge so as to protect passengers with a great relative time value from excessive congestion caused by passengers with a low relative time value. As a result, the socially efficient airport charge can be substantially higher than what we learned from the recent literature on congestion pricing with non-atomistic airlines.