Airport Pricing and Airport De-regulation Effects on Welfare: When All the Firms Are Present

This paper analyses the effects of peak load pricing on welfare. It introduces a model with three firms, two airlines and one airport, in a two-stage game that solves the airlines duopoly problem in a Bertrand game and the airport’s profit maximisation. Conclusions are different from others in precedent works, which stresses the importance of putting all firms together in the game. Mainly, results show that welfare does not always increase with peak load prices, and that the low quality airline and the airport increase their profits while the high quality airline loses profits. As an extension of the paper, airport de-regulation is applied to the model and effects are in some ways different from those of de-regulating other utilities. In particular results point out that congested airports’ de-regulation will have better results in what concerns welfare than non congested airports. JEL classification: L93