Airport Congestion Pricing and its Welfare Implications: The Case of Variable Passenger Time Costs
The Chinese University of Hong Kong (CUHK)
University of British Columbia (UBC) - Sauder School of Business
Pacific Economic Review, Vol. 16, Issue 1, pp. 83-102, 2011
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.
Number of Pages in PDF File: 20
Date posted: February 8, 2011