Congested Hubs

Hub congestion is a major problem and a relevant policy issue because it causes delays and many organizational problems at airports that end up implying unpleasant consequences both for air travelers and airlines. In a competitive framework in which carriers choose aircraft size, this paper suggests that airlines schedule too many ‡ights using overly small aircraft, which constitutes a major contributor to congestion. Twopart congestion tolls, accounting for the congestion imposed on other carriers and the congestion imposed on all passengers, are needed to recover e¢ ciency. Finally, we analyze the validity of the results by studying the e¤ects of network size, airport capacity, competition in layover time, and the formation of airline alliances. Keywords: congestion; hub-and-spoke networks; overprovision of frequency; congestion internalization; congestion tolls JEL Classi…cation Numbers: L13; L2; L93 I am indebted to Jan K. Brueckner for extremely helpful suggestions and to Jordi Jaumandreu and Pedro Cantos-Sánchez for additional comments. I acknowledge …nancial support from the Spanish Ministry of Education and Science (SEJ2006-00538 and SEJ2007-67891) and Generalitat de Catalunya (2005SGR00949). I am also grateful to all the comments received during the congresses Government Restructuring: Governments and Markets at Real Colegio Complutense Harvard University (US), XXIII Jornadas de Economia Industrial at Reus (Spain) and XXXIII Simposio de Analisis Economico at Zaragoza (Spain); and during my seminars at Universitat de Valencia (Spain), Universitat Rovira i Virgili at Reus (Spain) and University of Macedonia at Thessaloniki (Greece). yDepartament d’Economia, Universitat Rovira i Virgili, Avinguda de la Universitat 1, 43204 Reus, Spain. Tel.: +34977759850; fax: +34977759810; email: ricardo.‡ores@urv.cat.

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