Airline baggage fees and airport congestion

Abstract

This paper builds an economic model to investigate the interactions between baggage fee and airport congestion. With checked bag fees, we find that the socially optimal numbers of passengers and checked bags will not be achieved if the marginal congestion cost from carry-ons is larger than that from checked bags. However, it is possible with bundle pricing. Furthermore, we use numerical experiments to illustrate that checked bag pricing may underperform bundle pricing in terms of social welfare.