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Price Cap Regulation of Airports: A New Approach

Author

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  • Kevin Currier

    (Oklahoma State University)

Abstract

Airports are typically monopolistic providers of aeronautical services. Hence, the widespread privatization of airports within the last 20 years has in general been accompanied by some form of price regulation of aeronautical services. A great deal of attention has been given to the issue of whether the aeronautical price cap should be based upon revenues from both aeronautical and commercial services (the “single-till” approach) or revenues from aeronautical services only (the “dual-till” approach). However, each of these regulatory schemes will in general lead to regulated prices that are Pareto inefficient. This paper presents a price capping scheme that systematically exploits the potential Pareto improvements available under either the single-till or dual-till regimes.

Suggested Citation

  • Kevin Currier, 2008. "Price Cap Regulation of Airports: A New Approach," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-08l50001
    as

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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume12/EB-08L50001A.pdf
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    References listed on IDEAS

    as
    1. Tae Hoon Oum & Anming Zhang & Yimin Zhang, 2004. "Alternative Forms of Economic Regulation and their Efficiency Implications for Airports," Journal of Transport Economics and Policy, University of Bath, vol. 38(2), pages 217-246, May.
    2. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    3. Achim Czerny, 2006. "Price-cap Regulation of Airports: Single-till Versus Dual-till," Journal of Regulatory Economics, Springer, vol. 30(1), pages 85-97, July.
    4. Ingo Vogelsang & Jorg Finsinger, 1979. "A Regulatory Adjustment Process for Optimal Pricing by Multiproduct Monopoly Firms," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 157-171, Spring.
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    Cited by:

    1. Hangjun Yang & Anming Zhang, 2011. "Price-cap regulation of congested airports," Journal of Regulatory Economics, Springer, vol. 39(3), pages 293-312, June.
    2. Sismanidou, Athina & Tarradellas, Joan & Bel, Germà & Fageda, Xavier, 2013. "Estimating potential long-haul air passenger traffic in national networks containing two or more dominant cities," Journal of Transport Geography, Elsevier, vol. 26(C), pages 108-116.
    3. Ivaldi, Marc & Sokullu, Senay & Toru-Delibasi, Tuba, 2015. "Airport Prices in a Two-Sided Market Setting: Major US Airports," TSE Working Papers 15-587, Toulouse School of Economics (TSE).

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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy

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