Airport pricing and capacity with non-aviation markets: single-till versus dual-till regulation

This study investigates airport pricing and runway capacity in the presence of non-aviation markets to evaluate the relative performance of single-till versus dual-till regulations implemented at public airports for cost recovery. Using general and specified functional approaches, we obtain the following results. First, when the profits from the non-aviation market are exogenously given and positive, single-till regulation achieves higher social welfare than dual-till regulation. Second, when non-aviation profits are endogenously determined, dual-till (single-till) regulated airports generate negative (positive) profits from that market. Third, given this negative profit property, dual-till regulation achieves higher (lower) social welfare than single-till regulation when the complementarity between aviation and nonaviation demands is high (low). Fourth, both dual-till and single-till regulated airports overinvest in runway capacity, although dual-till regulated airports overinvest less (more) when demand complementarity is high (low). These clear-cut results provide important policy implications for regulatory authorities concerned with public interests.