A NOTE ON WELFARE EFFECTS OF DIFFERENT SYSTEMS OF AIRPORT CHARGES

摘要

According to theoretical predictions, the application of peak-load pricing to utilities usually results in higher levels of welfare and is recommended on this basis. In what concerns airports, this pricing system is adopted by some of EU airports, in order to alleviate congestion by means of demand shifting, while others charge according to aircrafts' weigh. This paper provides an insight on the effects on welfare of both pricing systems. Within the framework of a vertical differentiation model, and using a two-stage game with two airlines and one airport, I find that peak-load pricing actually decreases consumer surplus and welfare, but is the preferred system for the airport and for the low quality firm. These results are opposite to previous ones, and some particular features of the model, and of the airports' particular case, account for this difference.