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Scale and (Quasi) Scope Economies in Airport Technology: an Application to UK Airports

Author

Listed:
  • Anna Bottasso

    (Department of Economics, University of Genova, Italy)

  • Maurizio Conti

    (Department of Economics, University of Genova, Italy)

  • Davide Vannoni

    (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)

Abstract
In this study we consider a sample of the largest UK airports in order to estimate, for the first time for this sector, a multiproduct cost function using a flexible technology that nests most of the specifications commonly employed in the empirical literature. Another novelty of this work is that we provide estimates of (quasi) scope economies for the airport industry. Our main results suggest the existence of (quasi) scope economies that tend to decline with the size of the airport. The finding on quasi scope economies coupled with a set of cost complementarity tests suggest that cost savings mainly arise from the joint provision of services for national and international passengers and, to a lesser extent, to the addition of cargo transport activities; in turn, the production of non aeronautical services seems to be characterized by anti-cost complementarities. Finally, we confirm previous findings in the literature that global economies of scale are exhausted at about five million passengers in the case of the UK airport industry.

Suggested Citation

  • Anna Bottasso & Maurizio Conti & Davide Vannoni, 2018. "Scale and (Quasi) Scope Economies in Airport Technology: an Application to UK Airports," Working papers 056, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:056
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    More about this item

    Keywords

    Scope and Scale Economies; Composite Cost Function; Airports.;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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