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A Market for Airport Slots

Author

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  • Marra, Marleen

Abstract

This paper assesses the welfare implications of introducing airport slot auctions, while connecting the parallel worlds of demand-supply and auction models. Given the absence of an existing market and available bids, slot values are derived from airlines' additional profits based on a flight-level structural model. This model considers various factors, such as consumer preferences, scheduling efficiencies, and aircraft-specific costs, with a new flight-level dataset facilitating its estimation. Sizeable network benefits are estimated, which carry through to the market-based allocation and skew the resulting slot allocation towards dominant carriers within their hub airports. The network effects also lead to the unconventional result that a quantity cap reduces how much consumers gain from the auction, despite curtailing the market power of the dominant carrier.

Suggested Citation

  • Marra, Marleen, 2024. "A Market for Airport Slots," CEPR Discussion Papers 19442, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19442
    as

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    More about this item

    Keywords

    Airline industry; Structural estimation; Airports; Auctions; Demand estimation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions

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