Price-cap regulation of airports: single-till versus dual-till

This paper takes up the debate whether price-cap regulation of airports should take the form of single-till or dual-till regulation. The contribution is to model single- and dual-till regulation, evaluate their welfare implications, and compare them to Ramsey prices. We show that the single-till dominates the dual-till regulation at non-congested airports with regard to welfare maximization. However, none of them provides an airport with the incentives to implement Ramsey prices. A perfect price-cap regulation, which achieves this goal, is also presented. -- Eine übliche Form der Flughafen-Regulierung ist die Price-Cap-Regulierung. Hierbei ist zwischen einer Single-Till- und einer Dual-Till-Regulierung zu unterscheiden. In dieser Arbeit analysieren wir, welche der beiden Regulierungsvarianten aus Sicht eines Wohlfahrtsmaximierers vorteilhaft ist. Dazu wird ein Vergleich der Regulierungsergebnisse mit denen von Ramsey-Preisen vorgenommen. Es zeigt sich, dass bei nicht kapazitätsbeschränkten Flughäfen die Single-Till- Regulierung zu besseren Wohlfahrtsergebnissen führt als die Dual-Till- Regulierung. Dennoch, keine der beiden Regulierungsformen kann das Ramsey- Ergebnis erreichen. Aus diesem Grund wird zusätzlich eine perfekte Price-Cap- Regulierung vorgestellt, die zu einer Implementierung des Ramsey-Ergebnisses führt.

Congestion pricing vs. slot constraints to airport networks

Congestion has become a problem for many airports throughout the world. Two different policy options to control congestion are analyzed in this paper: slot constraints and congestion pricing. In particular, our model takes into account that the airline industry is characterized by significant demand uncertainty. Furthermore, due to the network character of the airline industry, the demand for airport capacities normally is complementary. We show that this favors the use of slot constraints compared to congestion pricing from a social point of view. In contrast, for monopolistic airports, prices as instruments constitute a dominant choice. --Slots,uncertainty,monopolistic airports,regulation

Cooperation and competition in the cargo liner shipping industry

It is widespread international practice that cargo liners meet at regular conferences to fix prices and quotas for individual routes. Presently, however, the respective European regulation granting liners an exemption from competition laws is under review. Liners claim that conferences are a necessary pre-condition for the provision of reliable services. In contrast, we demonstrate that there is little evidence for a destabilizing effect of competition, while conferences can themselves give rise to instability. The liners association (ELAA) has, in response to the EU review process, proposed an information exchange system as an alternative. In our view this has some merits. Transfer of data might even be mandatory, information output should be aggregated and anonymized and made available to the general public. We are skeptical, however, about any discussions between liners that go further than anonymized information exchange. -- In der Containerseeschifffahrt ist es weltweit üblich, dass sich die Reeder in Konferenzen über Frachtraten und -quoten für spezifische Handelsrouten abstimmen. In Europa wird jedoch die Regulierung, die diese Ausnahme vom Wettbewerbsrecht erlaubt, von der EU-Kommission zur Zeit überprüft. Die Reeder argumentieren, dass Konferenzen nötig sind, um ein stabiles Angebot sicherzustellen. Wir kommen jedoch zu dem Schluss, dass es keine Anhaltspunkte für außerodentlich destabilisierende Effekte von Konkurrenz gibt. Im Gegenteil zeigt sich, dass eher die Konferenzen destabilisierende Effekte erzeugen können. Die Assoziation der Reedereien (ELAA) hat, unter dem Druck der Überprüfung durch die EU, als Alternative die Einrichtung eines Informationsaustauschsystems vorgeschlagen. Dies hat aus unserer Sicht einige Vorteile. Man könnte die Übermittlung von Daten sogar zur Pflicht machen; der daraus gewonnene Informations-Output sollte aggregiert und anonymisiert sein und der allgemeinen Öffentlichkeit zur Verfügung gestellt werden. Wir sind jedoch skeptisch gegenüber Diskussionen zwischen den Reedern, die über den anonymisierten Informationsaustausch hinausgehen.

Modeling the Potential for Aviation Liberalization in Central Asia - Market analysis and implications for the Belt and Road initiative

This study analyzes aviation markets in the five land-locked countries in Central Asia. Panel data spanning from 2007 to 2015 are used to estimate airline entry patterns in origin-destination markets. Econometric estimates for domestic and international markets are subsequently benchmarked, and route groups are paired by alternative matching algorithms so that counter-factual analysis can be conducted. Our investigation suggests that although the Central Asia–China markets are characterized by poor connectivity and high airfares, great benefits could be achieved if more liberal aviation policies such as those proposed by the Belt and Road initiative were introduced. In particular, our counterfactual analysis suggests that if the Central Asia–China markets were regulated and operated in a similar way to the routes between Central Asia and other states, the probability of having aviation services between cities in China and Central Asia would increase by 27%, even by conservative estimates. The number of Chinese destinations could increase by more than 150%. Our study finds strong negative effects of the restrictive regulations on the international aviation markets, and calls for further liberalizations between Central Asia and the region’s major trade partners

Why pay for jobs (and not for tasks)?

Consider a principal who assigns a job with two tasks to two identical agents. Monitoring the agents’ efforts is costly. Therefore the principal rewards the agents based on their (noisy) relative outputs. This study addresses the question of whether the principal should evaluate the outputs of each task separately and award two winner prizes, one for each task, or whether it is better to award only one winner prize to the agent who performs the best over the two tasks. There are two countervailing effects. First, there is a prize-diluting effect, because for a given budget, the prizes will be smaller when there are two winner prizes than when there is only one winner prize. The prize-diluting effect reduces the agents’ incentives to invest their effort when there are two winner prizes. Second, there is a noise effect because the noisiness of the evaluation is reduced when there are two winner prizes. The main contribution of this study is to show that the prize-diluting effect dominates the noise effect. Hence, in general, principals will award prizes for combined tasks, and not for separate tasks. Several extensions are considered to test the robustness of this dominance result

Regulation of Two-Part Tariffs and Quality Choice Under Asymmetric Information

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Code-sharing, Price Discrimination and Welfare Losses

Airlines frequently use code-share agreements allowing each other to market seats on flights operated by partner airlines. Regulation may allow code-share agreements with antitrust immunity (cooperative price setting), or without antitrust immunity, or not at all. I compare the relative welfare effects of these regulation regimes on complementary airline networks. A crucial point is that such agreements are used to identify and price-discriminate interline passengers. I find that interline passengers always benefit from code-share agreements while non-interline passengers are worse off. Furthermore, I show that the latter effect questions the overall usefulness of code-share agreements from a welfare perspective. © 2009 LSE and the University of Bath

Airport congestion pricing and passenger types

We consider a public and congested airport served by airlines that may have market power, and two types of travelers with different relative values of time. We find that in the absence of passenger-type-based price discrimination by airlines, it can be useful to increase the airport charge so as to protect passengers with a great relative time value from excessive congestion caused by passengers with a low relative time value. As a result, the socially efficient airport charge can be substantially higher than what we learned from the recent literature on congestion pricing with non-atomistic airlines.Airports Airlines Passenger types Value of time Congestion Pricing