American Economic Review: Vol. 92 No. 5 (December 2002)
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Airport Congestion When Carriers Have Market Power
Brueckner, Jan K. 2002. "Airport Congestion When Carriers Have Market Power ." American Economic Review, 92(5): 1357-1375.
This paper analyzes airport congestion when carriers are nonatomistic, showing how the results of the road-pricing literature are modified when the economic agents causing congestion have market power. The analysis shows that when an airport is dominated by a monopolist, congestion is fully internalized, yielding no role for congestion pricing under monopoly conditions. Under a Cournot oligopoly, however, carriers are shown to internalize only the congestion they impose on themselves. A toll that captures the uninternalized portion of congestion may then improve the allocation of traffic. The analysis is supported by some rudimentary empirical evidence.
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Brueckner, Jan K.