Common Property and Private Property: The Case of Air Slots

The evolution of ownership institutions in landing/takeoff time slots at four high density airports is analyzed. Important insights are offered into how property rights institutions evolve, and how these institutions affect the evolution of markets. A detailed case study is presented of how governments and economic organizations brought about a shift from (a) government control of takeoff and landing slots in high density airports to (b) industry self-regulation of slots under a regime of common property ownership to (c) the establishment, by the US government, of a mechanism that endows individual airlines with private ownership of slots, with rights of transfer. Using this case study, we demonstrate how corporate actors shift efforts to the political arena in order to obtain more promising ownership arrangements and how government officials respond to such efforts by introducing changes in the institutional structures of ownership in the market. We also provide a quantitative analysis of the effects of the transition to private ownership on the efficiency of the use of scarce resources, on transaction costs, and on consumers' welfare.