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Optimal regulation design of airports: Investment incentives and impact of commercial services

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  • David Martimort

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EHESS - École des hautes études en sciences sociales)

  • Guillaume Pommey

    (Università degli Studi di Roma Tor Vergata [Roma, Italia] = University of Rome Tor Vergata [Rome, Italy] = Université de Rome Tor Vergata [Rome, Italie])

  • Jerome Pouyet

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School)

Abstract

Modern airports provide commercial services to passengers in addition to aeronautical services to airlines. We analyze how the airport's market power impacts the pricing of services when the airport also invests in the quality of its infrastructure. There is a need to regulate the airport and the optimal regulation can be implemented with a price-cap and a subsidy scheme targeted to the investment. The choice between a single-till and a dual-till approach does change neither the optimal regulation nor its implementation. We also investigate the consequences on the optimal regulation of the nature of the airport-airline relationship and of the observability of investment.

Suggested Citation

  • David Martimort & Guillaume Pommey & Jerome Pouyet, 2022. "Optimal regulation design of airports: Investment incentives and impact of commercial services," PSE-Ecole d'économie de Paris (Postprint) hal-03328394, HAL.
    • Handle: RePEc:hal:pseptp:hal-03328394
    DOI: 10.1016/j.trb.2022.07.008
    Note: View the original document on HAL open archive server: https://hal.science/hal-03328394v2
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    More about this item

    Keywords

    airports; regulation; commercial services; investment;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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