Airport congestion pricing and passenger types

We consider a public and congested airport served by airlines that may have market power, and two types of travelers with different relative values of time. We find that in the absence of passenger-type-based price discrimination by airlines, it can be useful to increase the airport charge so as to protect passengers with a great relative time value from excessive congestion caused by passengers with a low relative time value. As a result, the socially efficient airport charge can be substantially higher than what we learned from the recent literature on congestion pricing with non-atomistic airlines.

Research highlights
► It can be useful to increase the airport charge so as to protect passengers with a great relative time value from excessive congestion.
► The effect of passenger types can dominate the market-power effect with non-atomistic airlines.
► The existence of passenger types with different time values can reduce the welfare loss when the airport charge is not corrected for market shares.