How (Grandfathered) Slots Can Be a First-best Policy for a Congested Airport Whereas Prices Cannot

This study considers a stylised airport network, designed to identify clearly the role of local and nonlocal passengers for the assessment of local welfare-maximising airport congestion policies. The analysis shows that, in our framework, the local welfare-maximising slot quantity can coincide with the first-best outcome, whereas this is impossible in the case of pricing policy. Whether the outcomes coincide in the case of slot policy depends on the shares of locals and non-locals in terms of inframarginal and marginal passengers.