Abstract
From a theoretical prospective, marginal costs are one of the main determinants of pricing policy. However, their complexity and to some extend the artificiality of marginal costs makes the concept very unpopular among practitioners, also in the aviation industry. Nevertheless, in this paper we aim to estimate cost functions for German airports and derive marginal costs for different types of aircraft using them. This allows us to make efficiency comparison for aeronautical activities. Moreover, using the results of Morrison (1982), we are also able to estimate the “k” coefficients of the Ramsey-pricing formula and then use it as a proxy for market power of these airports. As the result we obtain two rankings from the sample: the first is the cost efficiency ranking of airports, and the second ranking is with respect to market power.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.