Airport cities and multiproduct pricing

Tiziana D'Alfonso, Valentina Bracagliaa, Yulai Wan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

8 Citations (Scopus)

Abstract

We study multiproduct pricing of core and side goods in the case of a (monopoly) airport city. The consumption of the side services is not conditional on the consumption of the core service, i.e., travellers as well as non-travellers may demand side goods but derive different benefits. We obtain several results in two different settings. The first one depicts the case in which individuals make decisions about buying core and side goods independently. In this case, non-traveller demand induces the facility to increase the core price with respect to the case in which only travellers may purchase side services. In the second one, individuals make decisions simultaneously, depending on their degree of foresight over the surplus that they anticipate to obtain from the consumption of side goods. In this case, the non-passenger demand might incentivizes the transport facility to charge lower core price, with respect to the case in which only travellers may purchase side services. Manipulating the side products mix in order to enrich the shopping experience of travellers (i.e., to increase the benefit that they derive from the joint consumption of core and side goods) may be welfare-enhancing. Traveller surplus would certainly increase, but such positive effects occur to the detriment of nontravellers, who find themselves to pay a higher price for side products, whatever is the level of consumer foresight.
Original languageEnglish
Pages (from-to)1-50
Number of pages50
JournalJournal of Transport Economics and Policy
Volume51
Issue number4
Publication statusPublished - 1 Jan 2017

Keywords

  • Airport city
  • Complementarity effect
  • Demand effect
  • Hierarchical demands
  • Monopoly
  • Multiproduct pricing

ASJC Scopus subject areas

  • Transportation
  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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