Deregulation and Efficiency in Slot-Constrained Airports

We investigate the presence of inefficiency in slot allocation when a coordinator allocates slots on destination markets served by monopoly and duopoly airlines, and the number of available peak-time slots is constrained by airport capacity. When an airport maintains regulated per-passenger fees, we observe the emergence of allocative inefficiency. Conversely, in scenarios where an airport has the autonomy to set fees, we find that, in line with empirical evidence, fee deregulation resolves these allocative inefficiencies by increasing per-passenger fees. However, the improvement in allocation efficiency may be counterbalanced by the rise in fees, potentially impacting overall welfare.