Price-cap regulation of congested airports

This paper investigates price-cap regulation of an airport where the airport facility (e.g. runway) is congested and airlines have market power. We show that when airport congestion is not a major problem, single-till price-cap regulation dominates dual-till price-cap regulation with respect to optimal welfare. Furthermore, we identify situations where dual-till regulation performs better than single-till regulation when there is significant airport congestion. For instance, when the airport can cover the airport costs associated with aeronautical services simply through an efficient aeronautical charge then dual-till regulation yields higher welfare.