Airport Congestion: When Theory Meets Reality

Some airports experience significant congestion at least some of the time, where "congestion" means that use of the airport by one aircraft delays or prevents use of the airport in that time slot by another. Analysts have used this theory to argue that airport congestion should be managed through the price mechanism, either by raising prices at peak times or by auctioning off permission to operate at peak times (slots) to the highest bidder. Recently, the federal government has tried to put this theory into practice by instituting slot auctions at the major New York airports. This article takes account of economic and political realities by proposing an auction market that reduces the influence of monopolies, is relatively complete, doesn't involve a wealth transfer, and still preserves choice at the margin that takes into account the value placed by other users on the slot.