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Airport Privatization and Regulation: Effects on Airport Charge, Capacity, and Social Welfare

In: Economic Regulation of Urban and Regional Airports

Author

Listed:
  • Yukihiro Kidokoro

    (National Graduate Institute for Policy Studies)

  • Anming Zhang

    (University of British Columbia)

Abstract

This paper examines airport privatization and various forms of airport regulation, taking into account of behavior of public administration and non-aeronautical service of an airport. First, we find that the regulator may set the price of non-aeronautical service lower than its marginal cost in order to counteract a high airport charge, if it can regulate non-aeronautical service. Second, price-cap regulation on aeronautical service could reduce airport charge, but also introduce an underinvestment in airport capacity that could lower social welfare. Whether price-cap or cost-based regulation is superior depends on the relative importance of the underinvestment effect under price-cap regulation, versus a regulatory waste associated with cost-based regulation.

Suggested Citation

  • Yukihiro Kidokoro & Anming Zhang, 2023. "Airport Privatization and Regulation: Effects on Airport Charge, Capacity, and Social Welfare," Advances in Spatial Science, in: Peter Forsyth & Jürgen Müller & Hans-Martin Niemeier & Eric Pels (ed.), Economic Regulation of Urban and Regional Airports, chapter 0, pages 125-169, Springer.
    • Handle: RePEc:spr:adspcp:978-3-031-20341-1_6
    DOI: 10.1007/978-3-031-20341-1_6
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