Airport regulation and competition |
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| Institution: | 1. Hebrew University, Mount Scopus, Jerusalem 91905, Israel;2. Monash University, Clayton 3800, Australia;3. Berlin School of Economics and Law, Badensche Strasse 50-51, D 10825 Berlin, Germany;4. University of Applied Sciences, Werderstr. 73, D 28199 Bremen, Germany;1. Stanford University, Civil and Environmental Engineering, Jerry Yang & Akiko Yamazaki Environment & Energy Building, 473 Via Ortega, Stanford, CA 94305, United States;2. Stanford University, Freeman Spogli Institute for International Studies, Encina Hall West, 417 Galvez Mall, Stanford, CA 94305, United States;3. Stanford University, Global Projects Center, Jerry Yang & Akiko Yamazaki Environment & Energy Building, 473 Via Ortega, Stanford, CA 94305, United States;1. Fellow, Judge Business School, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, UK;2. Emeritus Professor, University of Birmingham, UK |
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| Abstract: | In the airports industry, there is a trade off between imperfect (or monopolistic) competition and economic regulation (with the latter introducing separate economic distortions). The nature of the imperfectly competitive market in the supply of airport services is examined and it is suggested that market power is the consequence of the problems of gaining access to competing sites rather than of natural monopoly. Nevertheless, there are opportunities for substitution between airports (and other modes of transport) depending upon the characteristics of the market and historical and geographical circumstance although substitutability is too narrow a criterion for judging market power because of the transmittal effects of price competition in a spatial market. It is then suggested that some unusual economic characteristics of the industry provide an incentive for airports not to exploit market power and, absent these incentives, the adverse economic costs of exercising market power might be small. The paper concludes by suggesting that ex-post regulation of conduct provided for under normal competition law is probably sufficient to curb monopolistic excesses. |
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