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Airport regulation and competition

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  • Starkie, David

Abstract

In the airports industry, there is a trade off between imperfect (or monopolistic) competition and economic regulation (with the latter introducing separate economic distortions). The nature of the imperfectly competitive market in the supply of airport services is examined and it is suggested that market power is the consequence of the problems of gaining access to competing sites rather than of natural monopoly. Nevertheless, there are opportunities for substitution between airports (and other modes of transport) depending upon the characteristics of the market and historical and geographical circumstance although substitutability is too narrow a criterion for judging market power because of the transmittal effects of price competition in a spatial market. It is then suggested that some unusual economic characteristics of the industry provide an incentive for airports not to exploit market power and, absent these incentives, the adverse economic costs of exercising market power might be small. The paper concludes by suggesting that ex-post regulation of conduct provided for under normal competition law is probably sufficient to curb monopolistic excesses.

Suggested Citation

  • Starkie, David, 2002. "Airport regulation and competition," Journal of Air Transport Management, Elsevier, vol. 8(1), pages 63-72.
    • Handle: RePEc:eee:jaitra:v:8:y:2002:i:1:p:63-72
    DOI: 10.1016/S0969-6997(01)00015-1
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    References listed on IDEAS

    as
    1. Barrett, Sean D, 2000. "Airport competition in the deregulated European aviation market," Journal of Air Transport Management, Elsevier, vol. 6(1), pages 13-27.
    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. Laura Rovizzi & David Thompson, 1992. "The regulation of product quality in the public utilities and the Citizen's Charter," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 74-95, August.
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