Spatial Economics Seminar Amsterdam

Speaker(s)
Achim Czerny (WHU — Otto Beisheim School of Management)
Date
2012-10-15
Location
Amsterdam

This paper develops a unifying model that captures important elements of static and dynamic models of airport congestion pricing. Specifically, it considers a two-period model with peak and off-peak demands, where the probability that passengers scheduled for departure during the peak period actually depart during the peak period can be less than one. It is shown that airlines internalize self-imposed schedule delay and congestion delay costs and that the existence of passenger types with distinct time valuations affects the welfare-optimal dynamic toll structure. The investigation of a coarse-toll regime, where the same airport toll is charged during peak and off-peak periods, reveals that the welfare-optimal coarse toll exists of a carrier subsidy element and a term that corrects for external schedule delay and congestion delay costs when per-passenger schedule delay cost are sufficiently high, while it may only exist of a carrier subsidy element when perpassenger schedule delay cost are sufficiently low. In the latter case, it holds that an increase of carrier market power can increase welfare under the coarse-toll regime, while welfare is unaffected by changes in carrier market power, otherwise.