Airport Congestion and Value Pricing

Major airports are often congested which leads to an inefficient allocation of resources. For example, some planes carry low-value packages that are not time-sensitive. Other planes carry high-value, time-sensitive packages. You don’t want to delay the plane carrying the heart for transplant so that a plane carrying 3-day mail can land a bit early. Vernon Smith and co-authors created and tested a combinatorial auction market to allocate airport slots and improve efficiency.  In an auction market when there is congestion the high-value packages can outbid the low-value packages so not every package pays the same freight. Prices in an auction market are also valuable signals telling us where congestion is most severe and expansion most warranted. Revenues from pricing can be used to fund expansion.

Some people, however, are against prioritizing package delivery because they argue that treating every package equally will increase innovation.

Addendum: Don’t take these points as the only or determining considerations but I would like to see more attention given to analysis and less to slogans.


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