Competition and efficiency in the Italian airport system: new insights from a conditional nonparametric frontier analysis

• We investigate the relationship between airports’ competition and technical efficiency.
• For the first time, novel conditional nonparametric frontiers are estimated for airports.
• Competition affects mostly the frontier of best performers.
• On average, competition has a negative impact on technical efficiency.
• Results indicate the existence of two differently managed groups of airports.

We analyse the effect of competition on technical efficiency of Italian airports by applying a novel conditional nonparametric frontier analysis for the first time to the airport industry. We find that competition affects mostly the frontier of best performers, whilst airports that are lagging behind are less influenced. A novel two stage approach shows that, on average, competition has a negative impact on technical efficiency. We estimate a measure of pure efficiency, whitened from the main effect of the competition, whose distribution has a bi-modal shape, indicating the existence of two differently managed groups of airports.