The impact of airport competition on technical efficiency: A stochastic frontier analysis applied to Italian airport

The impact of airport competition on technical efficiency: A stochastic frontier analysis applied to Italian airport

Journal: Air Transport Management

Author: Davide Scotti, Paolo Malighetti, Gianmaria Martini, Nicola Volta

Published: 2012

Abstract

We investigate how the intensity of competition among airports affects their technical efficiency by computing airports’ markets on the basis of a potential demand approach. We find that the intensity of competition has a negative impact on airports’ efficiency in Italy from 2005 to 2008. This implies that airports belonging to a local air transportation system where competition is strong exploit their inputs less intensively than do airports with local monopoly power. Further, we find that public airports are more efficient than private and mixed ones. Hence, policy makers should provide incentives to implement airports’ specialization in local systems where competition is strong and monitor the inputs’ utilization rate even when private investors are involved.

Keywords: Airport efficiency, Airport privatization, Airport competition, Stochastic distance function

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