Effects of asymmetric information on airport congestion management mechanisms
Nicolás Figueroa; Olivia Aravena; Leonardo J. Basso
International Journal of Industrial Organization, January 2019. Vol. 62. Pages 4-27
Abstract: We study and compare three different mechanisms for capacity (slot) allocation in a congested airport when airlines have one-dimensional private information: direct allocation of slots, differentiated tolls and slot auctions. With perfect information, direct allocation is a first best policy which can be implemented through Pigouvian taxes or slot auctions; the mechanisms are equivalent in terms of social welfare. With the introduction of asymmetric information this equivalence is lost: direct allocation is always ex-post inefficient and, in some cases, tolls and subsequent quantity delegation is a better alternative social welfare wise. Auctions may be superior or inferior to tolls. We further show that naïve application of Pigouvian tolls is sub-optimal when imperfect information exists.
Keywords: Airport congestion, Pigouvian tolls, Airport slots, Asymmetric information
JEL: D62, L50, L93, R41, R48
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