Environmental charges in airline markets |
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| Institution: | 1. Department of Economics, University of Virginia, United States;2. Department of Economics, University of Oregon, United States;1. Ningbo Supply Chain Innovation Institute China (NSCIIC)/ MIT Network Scale, Room 506 Building 3 462 Wenyuan Road, Yinzhou District, Ningbo, Zhejiang Province 315100, China;2. Faculty of Law and Letters, Ehime University, 3 Bunkyo-cho, Matsuyama, Ehime 790-8577, Japan;1. Department of Aviation, Igdır University, Igdır, Turkey;2. Faculty of Aeronautics and Astronautics, Eskişehir Technical University, Eskişehir, Turkey;3. Department of Avionics, Erzincan Binali Yıldırım University, Erzincan, Turkey;4. Information Technology Research and Application Center, Istanbul Ticaret University, Istanbul, Turkey;1. School of Economics and Management, Anhui Normal University, Wuhu 241000, China;2. School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China;3. Sauder School of Business, University of British Columbia, Vancouver, BC V6T 1Z2, Canada |
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| Abstract: | Over the last two decades many airline markets have been deregulated, resulting in increased competition and use of different types of networks. At the same time there has been an intense discussion on environmental taxation of airline traffic. It is likely that an optimal environmental charge and the effects of a charge differ between different types of aviation markets. In this paper, we derive optimal flight (environmental) charges for different types of airline markets. The first type of market is a multiproduct monopoly airline operating either a point-to-point network or a hub-and-spoke network. The optimal charge is shown to be similar in construction to an optimal charge for a monopolist. We also compare the environmental impact of the two types of networks. Given no differences in marginal damages between airports we find that an airline will always choose the network with the highest environmental damages. The second type of market we investigate is a multiproduct duopoly, where two airlines compete in both passengers and flights. The formulation of the optimal charge is similar to the optimal charge of a single product oligopoly. However, we also show that it is, because of strategic effects, difficult to determine the effects of the charge on the number of flights. |
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