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Airport Congestion Pricing and its Welfare Implications: The Case of Variable Passenger Time Costs

20 Pages Posted: 8 Feb 2011  

Andrew Yuen

The Chinese University of Hong Kong (CUHK)

Anming Zhang

University of British Columbia (UBC) - Sauder School of Business

Date Written: February 2011

Abstract

This paper develops an analytical framework for airport congestion pricing by considering variable passenger time costs. We find that, first, congestion delays will not be fully internalized at the carrier level under different market structures, including those airports dominated by a monopoly airline. Therefore, congestion pricing is necessary regardless of the market structures. Second, although congestion pricing is welfare‐improving, it may not be Pareto‐improving. This might explain why congestion pricing is unpopular in the real world.

Suggested Citation

Yuen, Andrew and Zhang, Anming, Airport Congestion Pricing and its Welfare Implications: The Case of Variable Passenger Time Costs (February 2011). Pacific Economic Review, Vol. 16, Issue 1, pp. 83-102, 2011. Available at SSRN: https://ssrn.com/abstract=1757674 or http://dx.doi.org/10.1111/j.1468-0106.2010.00536.x

Andrew Yuen

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Anming Zhang

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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