AIRPORT PRICES--THEORY AND PRACTICE

To achieve the optimal use of economic resources all services should be priced, and prices should be no greater than or no less than the value of the alternative services which could be achieved with the same resources. Four economic characteristics of airports which are of significance in pricing policy and financial management are listed: airports are capital-intensive; capital assets are large and indivisible; a large part of the operating costs are related to general administration and organization; an airport provides a wide range of services. The following basic rules for economic pricing are suggested: where capital equipment is divisible, charge a price equal to long-run average cost; where capital equipment is indivisible and total demand is less than output charge a price equal to short-run marginal costs; where capital equipment is highly indivisible and total demand equals or exceeds the maximum output, charge the market clearing price. "Economic pricing" versus "sound financial management" is discussed. The characteristics of capital costs and the relationship of demand to capacity are the determining factors in setting prices at long-run average, short-run marginal or the market clearing price. Comments are made on the pricing policy at Heathrow-airport, U.K.

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  • Corporate Authors:

    IPC Transport Press, Limited

    Dorset House, Stamford Street
    London SE1 9LU,   England 
  • Authors:
    • Miller, D
  • Publication Date: 1973-7

Media Info

  • Pagination: p. 12-14
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00155508
  • Record Type: Publication
  • Source Agency: Massachusetts Institute of Technology
  • Files: TRIS
  • Created Date: Sep 28 1977 12:00AM