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Effects of asymmetric information on airport congestion management mechanisms

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  • Aravena, Olivia
  • Basso, Leonardo J.
  • Figueroa, Nicolás

Abstract

We study and compare three different mechanisms for capacity (slot) allocation in a congested airport when airlines have one-dimensional private information: direct allocation of slots, differentiated tolls and slot auctions. With perfect information, direct allocation is a first best policy which can be implemented through Pigouvian taxes or slot auctions; the mechanisms are equivalent in terms of social welfare. With the introduction of asymmetric information this equivalence is lost: direct allocation is always ex-post inefficient and, in some cases, tolls and subsequent quantity delegation is a better alternative social welfare wise. Auctions may be superior or inferior to tolls. We further show that naïve application of Pigouvian tolls is sub-optimal when imperfect information exists.

Suggested Citation

  • Aravena, Olivia & Basso, Leonardo J. & Figueroa, Nicolás, 2019. "Effects of asymmetric information on airport congestion management mechanisms," International Journal of Industrial Organization, Elsevier, vol. 62(C), pages 4-27.
    • Handle: RePEc:eee:indorg:v:62:y:2019:i:c:p:4-27
    DOI: 10.1016/j.ijindorg.2018.07.007
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    More about this item

    Keywords

    Airport congestion; Pigouvian tolls; Airport slots; Asymmetric information;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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