The Social Cost of Air Traffic Delays
29 Pages Posted: 2 Feb 2015
Date Written: February 2015
The so-called buffer time or buffer delay allows airlines to control for excessive delays by introducing extra time in their schedule in addition to what is technically required. . We study the differences between unregulated markets - where airlines are free to fix their buffer times strategically - and a situation where a social planner would control for time schedules, and in particular the buffer time. To do so, we use a calibrated model of a network of three cities - one of them being a hub - served by a single airline. Welfare losses that follow from delays are relatively small as compared to the potential benefits that would follow from a decrease in ticket prices. The model thus advocates that, at least for the connections that are considered, fares rather than delays should be the focus of institutions aiming at enhancing passengers welfare.
Keywords: calibration, delays, social optimum
JEL Classification: L50, L93, R41
Suggested Citation: Suggested Citation