Competition between multiproduct airports

We study airport competition when some types of commercial services, such as car parking or car rental, may be offered at the time of air ticket purchase through the Internet, in order to stimulate aviation demand. We find that airports set a lower aviation charge than they would have levied in the absence of concession services, when they are competing in online offers. Nevertheless, when only one airport pursues online offers, that facility sets a higher aviation charge than it would have levied in the absence of concession services, as long as profits from retail earned at the facility on the day of travel remain low enough. The Nash equilibrium of the game is such that both airports offer concession services online. This is welfare enhancing. Nevertheless, facilities might be caught in a Prisoner׳s Dilemma.