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Title:
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Platform pricing and consumer foresight: The case of airports
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Author:
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Flores-Fillol, Ricardo; Iozzi, Alberto; Valletti, Tommaso
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Other authors:
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Universitat Rovira i Virgili. Departament d'Economia; Universitat Rovira i Virgili. Centre de Recerca en Economia Industrial i Economia Pública |
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Abstract:
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Airports have become platforms that derive revenues from both aeronautical
and commercial activities. The demand for these services is characterized
by a one-way complementarity in that only air travelers can purchase
retail goods at the airport terminals. We analyze a model of optimal airport
behavior in which this one-way complementarity is subject to consumer
foresight, i.e., consumers may not anticipate in full the ex post retail surplus
when purchasing a flight ticket. An airport sets landing fees, and, in
addition, also chooses the retail market structure by selecting the number
of retail concessions to be awarded. We find that, with perfectly myopic
consumers, the airport chooses to attract more passengers via low landing
fees, and also sets the minimum possible number of retailers in order to increase
the concessions’ revenues, from which it obtains the largest share of
profits. However, even a very small amount of anticipation of the consumer
surplus from retail activities changes significantly the airport’s choices: the
optimal airport policy is dependent on the degree of differentiation in the
retail market. When consumers instead have perfect foresight, the airport
establishes a very competitive retail market, where consumers enjoy a large
surplus. This attracts passengers and it is exploited by the airport by
charging higher landing fees, which then constitute the largest share of its
profits. Overall, the airport’s profits are maximal when consumers have
perfect foresight.
Keywords: two-sided markets, platform pricing, one-way demand complementarity,
consumer foresight.
JEL classification: L1, L2, L93. |
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Publication date:
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2014 |
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Subject (UDC):
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338 - Situació econòmica. Política econòmica. Gestió, control i planificació de l'economia. Producció. Serveis. Turisme. Preus |
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Subject(s):
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Organització industrial
Aviació comercial
Aeroports
Comerç al detall
Consumidors |
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Rights:
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L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons: http://creativecommons.org/licenses/by-nc-nd/3.0/es/ |
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Pages:
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35 p. |
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Document type:
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Working Paper |
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Published by:
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Universitat Rovira i Virgili. Departament d'Economia
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Collection:
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Documents de treball del Departament d'Economia;2014-24
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