INTERNALIZATION OF AIRPORT CONGESTION: A NETWORK ANALYSIS

The resurgence of air traffic in the U.S. has focused attention on the need for improved policies and methods for airport congestion pricing. In this presentation, I establish a simple rule for the computation of airport congestion tolls that reflects the internalization of congestion. My theory argues that the airport toll system should not fully charge each airline for the congestion damage caused by an extra flight (as would be suggested by the standard road-pricing rule). Instead, an airline should only pay for the congestion damage it imposes on other carriers. This rule is easy to implement and could help policy makers design proper toll systems at airports worldwide. I test its validity within a realistic network structure containing multiple hub airports.