Market Structure and Internalization of Congestion in Air Transportation

Abstract

We use a simple analytical framework to derive pricing rules for oligpolistic airlines at airports that are served by competitive airlines as well. The pricing rules show how the degree of internalization of marginal congestion costs depends on market structure. The analysis illustrates the importance of selecting an accurate representation of market structure, when making recommendations about the desirability of congestion pricing mechanisms.Airports; Airline; Congestion; Congestion tolls; Oligopoly