Competitive award of scarce airport slots: an empirical analysis

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This paper explores the welfare impacts of introducing a market-based mechanism for the allocation of scarce airport take-off and landing slots. Instead of the usual revealed preference approach that recovers values from optimal bids, slot values are obtained as the incremental profit that an airline can generate by operating a flight in that slot. A flight-level structural model of demand and supply of airline tickets is developed that accounts for consumer departure time preferences, scheduling efficiencies, and aircraft-specific costs. Counterfactual simulations assess welfare impacts of auctioning slots on an airport-by-airport basis, as well as the role of departure hub economies of scale, budget constraints, and quantity caps.