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Opening Ground Handling Markets to Competition: Effects on Welfare

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  • Cristina Barbot

    (Formerly at CEFUP, Faculdade de Economia do Porto, 4200-464 Porto, Portugal)

Abstract

This paper addresses the case of complementary services with vertical relations, using the example of airport handling activities. Our model investigates the effects on welfare and competitiveness of four handling market situations and confirms Cournot's result on competition in complementary goods, unless there are efficiency gaps. We find that horizontal competition in handling services leads to market foreclosure even if an airline performs self-handling. We add some remarks on regulatory issues, showing that regulation may be pointless or even anticompetitive. We show that Council Directive 96/67/EC, although intending to increase competition, may be anticompetitive and decrease consumer surplus. We develop an empirical study in which some of our theoretical results are confirmed.

Suggested Citation

  • Cristina Barbot, 2012. "Opening Ground Handling Markets to Competition: Effects on Welfare," Transportation Science, INFORMS, vol. 46(4), pages 536-546, November.
    • Handle: RePEc:inm:ortrsc:v:46:y:2012:i:4:p:536-546
    DOI: 10.1287/trsc.1120.0413
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    References listed on IDEAS

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    1. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
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    3. Brueckner, Jan K. & Proost, Stef, 2010. "Carve-outs under airline antitrust immunity," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 657-668, November.
    4. Brueckner, Jan K., 2001. "The economics of international codesharing: an analysis of airline alliances," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1475-1498, December.
    5. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
    6. Bilotkach, Volodymyr, 2007. "Complementary versus semi-complementary airline partnerships," Transportation Research Part B: Methodological, Elsevier, vol. 41(4), pages 381-393, May.
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    Cited by:

    1. Button, Kenneth & Neiva, Rui, 2013. "Single European Sky and the functional airspace blocks: Will they improve economic efficiency?," Journal of Air Transport Management, Elsevier, vol. 33(C), pages 73-80.

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