IDEAS home Printed from https://ideas.repec.org/a/eee/ecotra/v3y2014i4p270-281.html
   My bibliography  Save this article

Competition between multiproduct airports

Author

Listed:
  • Bracaglia, Valentina
  • D׳Alfonso, Tiziana
  • Nastasi, Alberto

Abstract

We study airport competition when some types of commercial services, such as car parking or car rental, may be offered at the time of air ticket purchase through the Internet, in order to stimulate aviation demand. We find that airports set a lower aviation charge than they would have levied in the absence of concession services, when they are competing in online offers. Nevertheless, when only one airport pursues online offers, that facility sets a higher aviation charge than it would have levied in the absence of concession services, as long as profits from retail earned at the facility on the day of travel remain low enough. The Nash equilibrium of the game is such that both airports offer concession services online. This is welfare enhancing. Nevertheless, facilities might be caught in a Prisoner׳s Dilemma.

Suggested Citation

  • Bracaglia, Valentina & D׳Alfonso, Tiziana & Nastasi, Alberto, 2014. "Competition between multiproduct airports," Economics of Transportation, Elsevier, vol. 3(4), pages 270-281.
    • Handle: RePEc:eee:ecotra:v:3:y:2014:i:4:p:270-281
    DOI: 10.1016/j.ecotra.2015.02.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2212012215000076
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecotra.2015.02.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Graham, Anne, 2009. "How important are commercial revenues to today's airports?," Journal of Air Transport Management, Elsevier, vol. 15(3), pages 106-111.
    2. David Starkie, 2001. "Reforming UK Airport Regulation," Journal of Transport Economics and Policy, University of Bath, vol. 35(1), pages 119-135, January.
    3. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
    4. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 585-637.
    5. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    6. Tiziana D'alfonso & Alberto Nastasi, 2014. "Airport-Airline interaction: some food for thought," Transport Reviews, Taylor & Francis Journals, vol. 34(6), pages 730-748, November.
    7. Belardini, Andrea, 2013. "Growing retail revenues at airports," Journal of Airport Management, Henry Stewart Publications, vol. 7(3), pages 222-230, June.
    8. Hangjun Yang & Anming Zhang, 2011. "Price-cap regulation of congested airports," Journal of Regulatory Economics, Springer, vol. 39(3), pages 293-312, June.
    9. Frank Verboven, 1999. "Product Line Rivalry and Market Segmentation—with an Application to Automobile Optional Engine Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 399-425, December.
    10. Ian Jones & Ivan Viehoff & Phillipa Marks, 1993. "The economics of airport slots," Fiscal Studies, Institute for Fiscal Studies, vol. 14(4), pages 37-57, November.
    11. Morrison, William G., 2009. "Real estate, factory outlets and bricks: A note on non-aeronautical activities at commercial airports," Journal of Air Transport Management, Elsevier, vol. 15(3), pages 112-115.
    12. Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
    13. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    14. Tiziana D'Alfonso & Changmin Jiang & Yulai Wan, 2013. "Airport Pricing, Concession Revenues and Passenger Types," Journal of Transport Economics and Policy, University of Bath, vol. 47(1), pages 71-89, January.
    15. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    16. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    17. 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.
    18. Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
    19. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    20. Ralph A. Winter, 1997. "Colluding on Relative Prices," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 359-371, Summer.
    21. Gillen, David & Lall, Ashish, 2002. "The economics of the Internet, the new economy and opportunities for airports," Journal of Air Transport Management, Elsevier, vol. 8(1), pages 49-62.
    22. Zhang, Anming & Zhang, Yimin, 2003. "Airport charges and capacity expansion: effects of concessions and privatization," Journal of Urban Economics, Elsevier, vol. 53(1), pages 54-75, January.
    23. 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.
    24. Oliveira-Castro, Jorge M., 2003. "Effects of base price upon search behavior of consumers in a supermarket: An operant analysis," Journal of Economic Psychology, Elsevier, vol. 24(5), pages 637-652, October.
    25. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
    26. Zhang, Anming & Zhang, Yimin, 1997. "Concession revenue and optimal airport pricing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 287-296, December.
    27. Barbot, Cristina, 2009. "Airport and airlines competition: Incentives for vertical collusion," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 952-965, December.
    28. Halpern, Nigel & Regmi, Uttam Kumar, 2013. "Content analysis of European airport websites," Journal of Air Transport Management, Elsevier, vol. 26(C), pages 8-13.
    29. Alford, Bruce L. & Biswas, Abhijit, 2002. "The effects of discount level, price consciousness and sale proneness on consumers' price perception and behavioral intention," Journal of Business Research, Elsevier, vol. 55(9), pages 775-783, September.
    30. Zhang, Anming & Zhang, Yimin, 2010. "Airport capacity and congestion pricing with both aeronautical and commercial operations," Transportation Research Part B: Methodological, Elsevier, vol. 44(3), pages 404-413, March.
    31. Matsumura, Toshihiro & Shimizu, Daisuke, 2005. "Spatial Cournot competition and economic welfare: a note," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 658-670, November.
    32. Starkie, David, 2002. "Airport regulation and competition," Journal of Air Transport Management, Elsevier, vol. 8(1), pages 63-72.
    33. Czerny, Achim I., 2013. "Public versus private airport behavior when concession revenues exist," Economics of Transportation, Elsevier, vol. 2(1), pages 38-46.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koki Arai & Shuya Hayashi, 2021. "Business diversification and multifaceted markets," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 235-255, September.
    2. Czerny, Achim I. & Zhang, Hanxiang, 2020. "Rivalry between airport ancillary and city-center supplies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    3. Fabio Carlucci & Andrea Cirà & Paolo Coccorese, 2018. "Measuring and Explaining Airport Efficiency and Sustainability: Evidence from Italy," Sustainability, MDPI, vol. 10(2), pages 1-17, February.
    4. Tiziana D'Alfonso & Valentina Bracaglia & Yulai Wan, 2015. "Airport cities and multiproduct pricing," DIAG Technical Reports 2015-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    5. D’Alfonso, Tiziana & Daraio, Cinzia & Nastasi, Alberto, 2015. "Competition and efficiency in the Italian airport system: new insights from a conditional nonparametric frontier analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 80(C), pages 20-38.
    6. Bottasso, Anna & Conti, Maurizio & Vannoni, Davide, 2019. "Scale and (quasi) scope economies in airport technology. An application to UK airports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 125(C), pages 150-164.
    7. Wan, Xi & Zou, Benteng, 2024. "Multi-product airport competition and optimal airport charges," Research in Transportation Economics, Elsevier, vol. 103(C).
    8. Martin-Domingo, Luis & Martín, Juan Carlos, 2016. "Airport mobile internet an innovation," Journal of Air Transport Management, Elsevier, vol. 55(C), pages 102-112.
    9. Achim I. Czerny & Anmin Zhang, 2015. "Single-Till versus Dual-Till Regulation of Airports," Tinbergen Institute Discussion Papers 15-049/VIII, Tinbergen Institute.
    10. Czerny, Achim I. & Shi, Zijun & Zhang, Anming, 2016. "Can market power be controlled by regulation of core prices alone? An empirical analysis of airport demand and car rental price," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 260-272.
    11. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    12. Achim I. Czerny & Zijun Shi & Anming Zhang, 2015. "Can market power be controlled by regulation of core prices alone?: An empirical analysis of airport demand and car rental price," Tinbergen Institute Discussion Papers 15-041/VIII, Tinbergen Institute.
    13. Gitto, Simone & Mancuso, Paolo, 2019. "Brand perceptions of airports using social networks," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 153-163.
    14. Jiang, Changmin & Zhang, Anming, 2015. "Airport congestion pricing and terminal investment: Effects of terminal congestion, passenger types, and concessionsAuthor-Name: Wan, Yulai," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 91-113.
    15. D’Amico, Giuseppe, 2022. "Platform competition and consumer foresight: The case of airports," Economics of Transportation, Elsevier, vol. 29(C).
    16. Choo, Yap Yin & Corbo, Leonardo & Wang, Kun, 2018. "Joint impact of airline market structure and airport ownership on airport market power and profit margin," Transport Policy, Elsevier, vol. 72(C), pages 67-78.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:aeg:report:2014-4 is not listed on IDEAS
    2. Valentina Bracaglia & Tiziana D'Alfonso & Alberto Nastasi, 2014. "Multiproduct airport competition and e-commerce strategies," DIAG Technical Reports 2014-04, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    3. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2016. "Airport capacity choice under airport-airline vertical arrangements," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 298-309.
    4. Choo, Yap Yin & Corbo, Leonardo & Wang, Kun, 2018. "Joint impact of airline market structure and airport ownership on airport market power and profit margin," Transport Policy, Elsevier, vol. 72(C), pages 67-78.
    5. Tiziana D'Alfonso & Valentina Bracaglia & Yulai Wan, 2015. "Airport cities and multiproduct pricing," DIAG Technical Reports 2015-14, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    6. Kidokoro, Yukihiro & Lin, Ming Hsin & Zhang, Anming, 2016. "A general-equilibrium analysis of airport pricing, capacity, and regulation," Journal of Urban Economics, Elsevier, vol. 96(C), pages 142-155.
    7. Kidokoro, Yukihiro & Zhang, Anming, 2018. "Airport congestion pricing and cost recovery with side business," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 222-236.
    8. Achim I. Czerny & Anmin Zhang, 2015. "Single-Till versus Dual-Till Regulation of Airports," Tinbergen Institute Discussion Papers 15-049/VIII, Tinbergen Institute.
    9. Xiao, Yibin & Fu, Xiaowen & Zhang, Anming, 2013. "Demand uncertainty and airport capacity choice," Transportation Research Part B: Methodological, Elsevier, vol. 57(C), pages 91-104.
    10. Czerny, Achim I. & Zhang, Hanxiang, 2020. "Rivalry between airport ancillary and city-center supplies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 141(C).
    11. Czerny, Achim I. & Shi, Zijun & Zhang, Anming, 2016. "Can market power be controlled by regulation of core prices alone? An empirical analysis of airport demand and car rental price," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 260-272.
    12. Achim I. Czerny & Zijun Shi & Anming Zhang, 2015. "Can market power be controlled by regulation of core prices alone?: An empirical analysis of airport demand and car rental price," Tinbergen Institute Discussion Papers 15-041/VIII, Tinbergen Institute.
    13. Jiang, Changmin & Zhang, Anming, 2015. "Airport congestion pricing and terminal investment: Effects of terminal congestion, passenger types, and concessionsAuthor-Name: Wan, Yulai," Transportation Research Part B: Methodological, Elsevier, vol. 82(C), pages 91-113.
    14. Kidokoro, Yukihiro & Zhang, Anming, 2022. "Airport cities and social welfare," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 187-209.
    15. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 2018. "The joy of flying: Efficient airport PPP contracts," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 131-146.
    16. Yang, Hangjun & Fu, Xiaowen, 2015. "A comparison of price-cap and light-handed airport regulation with demand uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 73(C), pages 122-132.
    17. Ricardo Flores‐Fillol & Alberto Iozzi & Tommaso Valletti, 2018. "Platform pricing and consumer foresight: The case of airports," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 705-725, October.
    18. Wan, Xi & Zou, Benteng, 2024. "Multi-product airport competition and optimal airport charges," Research in Transportation Economics, Elsevier, vol. 103(C).
    19. Xiao, Yi-bin & Fu, Xiaowen & Oum, Tae H. & Yan, Jia, 2017. "Modeling airport capacity choice with real options," Transportation Research Part B: Methodological, Elsevier, vol. 100(C), pages 93-114.
    20. Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
    21. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecotra:v:3:y:2014:i:4:p:270-281. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecotra .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.