IDEAS home Printed from https://ideas.repec.org/a/eee/transb/v192y2025ics0191261524002558.html
   My bibliography  Save this article

Airport city and downtown store competition and regulation under incomplete information

Author

Listed:
  • Zheng, Shiyuan
  • Zhang, Anming
  • Wang, Kun
  • Fu, Xiaowen

Abstract

Many airports have evolved into "airport cities" by expanding their business ventures beyond traditional goods and services to include hotels, convention centers, and shopping complexes. These airport cities, often referred to as airport malls, now directly compete with downtown stores due to their increasingly similar range of products and services. Both air passengers and local residents can choose to shop at either the airport mall or downtown stores. We model the government's optimal regulation of airport cities under potentially incomplete information regarding their true operational costs and service quality. Our analytical results suggest that airports can earn "information rent" in the form of higher profits when the government lacks complete information about the operational cost of airport mall. This incomplete information results in distortions in airport aeronautical charge and airport mall shopping price. Our findings indicate that it is more socially efficient for the government to allow airports to earn an "information rent" through higher aeronautical profits, with the direction of airport price distortion depending on the price elasticity of air travel demand. In contrast, the government's incomplete information about airport mall service quality does not lead to distortions compared to the complete information scenario. We also examined outcomes under different airport city regulation regimes: regulation by the central government (centralization), local government (localization), and both governments (dual regulation). Dual regulation results in the most significant airport pricing distortion, benefiting airports with the highest information rent. However, this approach still yields greater social welfare than localization. Consequently, the central government always has an incentive to intervene in airport city regulation. Nevertheless, our numerical simulations indicate that central government regulation under incomplete information could result in worse social welfare outcomes than no regulation at all.

Suggested Citation

  • Zheng, Shiyuan & Zhang, Anming & Wang, Kun & Fu, Xiaowen, 2025. "Airport city and downtown store competition and regulation under incomplete information," Transportation Research Part B: Methodological, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:transb:v:192:y:2025:i:c:s0191261524002558
    DOI: 10.1016/j.trb.2024.103131
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0191261524002558
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.trb.2024.103131?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.

    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:transb:v:192:y:2025:i:c:s0191261524002558. 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.

    We have no bibliographic references for this item. You can help adding them by using 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/wps/find/journaldescription.cws_home/548/description#description .

    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.