The sky is the limit? The determinants and constraints of European airports' commercial revenues

This study investigates the determinants of commercial and retail airport revenues as well as revenues from real estate operations. Cross-sectional OLS, 2SLS and robust regression models of European airports identify a number of significant drivers of airport revenues. Aviation revenues per passenger are mainly determined by the national income per capita in which the airport is located, the percentage of leisure travelers and the size of the airport proxied by total aviation revenues. Main drivers of commercial revenues per passenger include the total number of passengers passing through the airport, the ratio of commercial to total revenues, the national income, the share of domestic and leisure travelers and the total number of flights. These results are in line with previous findings of a negative influence of business travelers on commercial revenues per passenger. We also find that a high amount of retail space per passenger is generally associated with lower commercial revenues per square meter confirming decreasing marginal revenue effects. Real estate revenues per passenger are positively associated with national income per capita at airport location, share of intra-EU passengers and percent delayed flights. Overall, aviation and non-aviation revenues appear to be strongly interlinked, underlining the potential for a comprehensive airport management strategy above and beyond mere cost minimization of the aviation sector.

Buyer–seller interaction in experimental spatial markets

We report results from experimental spatial markets with endogenous buyer location on a discrete version of Hotelling's linear city. Buyer locations favor more often the hypothesis of transportation cost minimization than that of strategic location aimed at increasing price competition between sellers. However, the latter of the two hypotheses receives systematic support too. Differentiation by seller-subjects is substantially less than the theory would predict for the specific framework used. Our results suggest that location strategies adopted by subjects can be seen as a rational process favoring conservative product design and spatial agglomeration of economic activities.