Sequential peak-load pricing: the case of airports and airlines

Authors: Basso, Leonardo J.¹; Zhang, Anming²

Source: Canadian Journal of Economics, Volume 41, Number 3, August/août 2008 , pp. 1087-1119(33)

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Abstract:

Abstract.

We investigate airport peak-load pricing using a vertical structure of airport and airlines. We find that a profit-maximizing airport would charge higher peak and off-peak runway prices and a higher peak/off-peak price differential than a public airport. Consequently, airport privatization would lead to both fewer total passengers and fewer passengers in the peak period. Although peak-travelling passengers benefit from fewer delays, this low level of peak congestion is not efficient, suggesting that airport privatization cannot be judged based on its effect on congestion alone. We also examine pricing behaviour of a public airport constrained to charge a time independent price.

Keywords: L93; H23; L50

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1540-5982.2008.00497.x

Affiliations: 1: Department of Civil Engineering, Universidad de Chile 2: Sauder School of Business, University of British Columbia

Publication date: 2008-08-01