The Deterministic Bottleneck Model with Non-Atomistic Traffic

This paper investigates the conditions under which dominant airlines internalize self-imposed delays in a deterministic bottleneck model of airport pricing, complementing the similar analysis of Brueckner and Van Dender (BVD, 2008) for the standard congestion-pricing model. A unified model of bottleneck tolling includes untolled, uniform-, coarse-, multi-step-, and continuous-toll equilibria as special cases. Explicit closed-form solutions for aircraft scheduling and tolling provide a theoretical foundation for Daniel's (1995, 2008) empirical findings that dominant airlines often ignore self-imposed delays to preempt additional entry by fringe aircraft. Optimal tolls for dominant and fringe airlines have identical step increments but they may differ by a uniform amount, rather than varying in inverse proportion to market share as in BVD. The model is the price-setting dual of Daniel’s (2014) quantity-setting slot constraint model, and achieves identical social costs. Optimal tolling pays for optimal airport capacity, under constant returns for building airport capacity.