AIRPORT CONGESTION PRICING AND ITS WELFARE IMPLICATIONS: THE CASE OF VARIABLE PASSENGER TIME COSTS

• Published in: Pacific economic review (Oxford, England) Vol. 16; no. 1; pp. 83 - 102
• Main Authors: Yuen, Andrew C. L., Zhang, Anming
• Format: Journal Article
• Language: English
• Published: Melbourne, Australia Blackwell Publishing Asia 01-02-2011; Blackwell Publishing Ltd
• Subjects: Airlines; Airports; Business conditions; Federal regulation; Passengers; Pricing policies
• ISSN: 1361-374X; 1468-0106
• DOI: 10.1111/j.1468-0106.2010.00536.x

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.