We investigate the competitive effects of exchanges or sales of airport landing slots, using a model where airlines allocate their slot endowments across routes consistent with a Cournot–Nash equilibrium. With symmetric endowments, an increase in the number of slot-holding airlines raises social welfare and consumer surplus. Under asymmetric slot endowments, larger slot holders serve “thin” demand routes that are not served by smaller slot holders. Transfers of slots from larger to smaller slot holders increase social welfare and consumer surplus; however, fewer routes may be served. These results may be reversed if airlines face substantial route-level fixed costs.
Review of Industrial Organization – Springer Journals
Published: Aug 27, 2014
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