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Equilibrium Airfares, Frequencies and Airport Taxes in a Multiple Airport Region: An Application of the Nested Logit Demand Model

Author

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  • Eric Pels

    (Vrije Universiteit Amsterdam)

  • Peter Nijkamp

    (Vrije Universiteit Amsterdam)

  • Piet Rietveld

    (Vrije Universiteit Amsterdam)

Abstract

In this paper a model, based on the nested multinomial logit model, is used to analyze airport competition and airline competition in a multiple airport region. It is shown that if the frequency elasticity of demand is smaller than 1, airfare-frequency and airport tax equilibria exist and are unique.Symmetric equilibria are derived analytically and their properties are discussed. Asymmetric equilibria are obtained numerically, and their properties are discussed.

Suggested Citation

  • Eric Pels & Peter Nijkamp & Piet Rietveld, 1998. "Equilibrium Airfares, Frequencies and Airport Taxes in a Multiple Airport Region: An Application of the Nested Logit Demand Model," Tinbergen Institute Discussion Papers 98-073/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19980073
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    References listed on IDEAS

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    1. Jaibi, M. Raouf & ten Raa, Thijs, 1998. "An asymptotic foundation for logit models," Regional Science and Urban Economics, Elsevier, vol. 28(1), pages 75-90, January.
    2. Oum, Tae Hoon & Zhang, Anming & Zhang, Yimin, 1996. "A note on optimal airport pricing in a hub-and-spoke system," Transportation Research Part B: Methodological, Elsevier, vol. 30(1), pages 11-18, February.
    3. Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 1997. "Substitution and complementarity in aviation: airports vs airlines," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(4), pages 275-286, December.
    4. Hansen, Mark, 1990. "Airline competition in a hub-dominated environment: An application of noncooperative game theory," Transportation Research Part B: Methodological, Elsevier, vol. 24(1), pages 27-43, February.
    5. Brooke, A.S. & Caves, R.E. & Pitfield, D.E., 1994. "Methodology for predicting European short-haul air transport demand from regional airports," Journal of Air Transport Management, Elsevier, vol. 1(1), pages 37-46.
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    Cited by:

    1. Daniel Borebly, 2018. "A case study on Germany's aviation tax using the synthetic control approach," Working Papers 1816, University of Strathclyde Business School, Department of Economics.
    2. Borbely, Daniel, 2019. "A case study on Germany’s aviation tax using the synthetic control approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 126(C), pages 377-395.
    3. Eric Pels & Peter Nijkamp & Piet Rietveld, 1998. "Airport Choice in a Multiple Airport Region: An Empirical Analysis for the San Francisco Bay Area," Tinbergen Institute Discussion Papers 98-041/3, Tinbergen Institute.

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