Achim I. Czerny

Third-degree price discrimination in the presence of congestion externality

This paper analyzes third-degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served. The model features the business-passenger and leisure-passenger markets where business passengers exhibit a higher time valuation, and a less price-elastic demand, than leisure passengers. Our main result is the identification of the time-valuation effect of price discrimination, which can work in the opposite direction as the well-known output effect on welfare. This time-valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output.

Single-Till versus Dual-Till Regulation of Airports: Where Do Academics and Regulators (Dis)Agree?

Most airports operate under public ownership, while the number of private and economically regulated airports is increasing. Furthermore, airports nowadays earn as much revenue from commercially-oriented business activities as from aeronautical activities. These two observations lead to a natural question: How to optimally integrate profits derived from commercial activities into the regulation of aeronautical charges? This question is addressed in this paper by comparing literature results on the relative benefits of regulatory regimes with regulatory practice in Ireland and the United Kingdom to identify avenues for future research which could be useful to support and improve future regulatory decisions.

Single-Till versus Dual-Till Regulation of Airports

Most airports operate under public ownership, while some are privatized and economically regulated. Only a few airports are privately owned and experience little or no ex-ante regulation of airport charges. On the other hand, airports nowadays earn as much revenue from transport-related activities as from commercially-oriented business activities. Taken together, these two observations lead to a natural question: How to optimally integrate profits derived from commercial activities into the regulation of airport infrastructure charges? This question is addressed in this paper. We discuss basic issues that are relevant for the design of regulatory regimes for airports and how these issues can be tackled by using airport profits derived from commercial activities for infrastructure cost recovery. The main insights are summarized at the end of each section and then are further summarized in the conclusions section.

A Theory of Continuous Uncertainty Types

This paper distinguishes uncertainty types that differ continuously with respect to the degree to which uncertainty affects the optimal price/price markup or optimal quantity. A monopoly example is used to show that seemingly strong assumptions on functional forms can represent a wide variety of different scenarios, while (implicit) assumptions on continuous uncertainty types can lead to quite special results. Monopoly examples of the newsboy problem type are further used to show that the optimal capacity level and the optimal composition of capacity in terms of the number and size of production units depends crucially on the type of uncertainty and the employed functional forms for utilities and costs.

Complementary Alliances with Endogenous Fleets and Load Factors

This paper analyzes the effect of carrier collaboration on fleet capacity, fleet structures in terms of the number and the size of vehicles, and load factors. The model features complementary networks, scheduling, price elastic demands, and demand uncertainty. For the case of a given number of vehicles, the analysis shows that carrier collaboration increases vehicle sizes (thus, fleet capacity) if marginal seat costs are low while fleet capacity remains unchanged if marginal seat costs are high. If both vehicle sizes and vehicle numbers can be varied, then collaboration will always increase vehicle numbers and fleet capacity, while the effects on vehicle sizes and, thus, also load factors, are ambiguous and therewith hard to predict. Numerical simulations indicate that collaboration increases expected load factors also when the number of vehicles is endogenous.