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AIRPORT CONGESTION PRICING AND ITS WELFARE IMPLICATIONS: THE CASE OF VARIABLE PASSENGER TIME COSTS
Author(s) -
Yuen Andrew C. L.,
Zhang Anming
Publication year - 2011
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2010.00536.x
Subject(s) - congestion pricing , economics , variable (mathematics) , microeconomics , singapore area licensing scheme , variable pricing , welfare , variable cost , traffic congestion , pareto principle , monopoly , operations management , transport engineering , market economy , engineering , mathematical analysis , mathematics
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.