A Game-Theoretic Analysis of Reallocation Mechanisms for Airport Landing Slots

Abstract

As airport arrival capacities increasingly constrain the air transportation system, there is a need for mechanisms by which airlines can exchange landing slots amongst each other. We analyze two such mechanisms, scaled airline preferences and two-for-two trades, from a game-theoretic perspective. This paper investigates the extent to which strategic behavior on part of the airlines can impact the performance of each mechanism. In addition to increasing system efficiency, the reallocation mechanisms should exhibit desirable fairness and incentive properties, notions that we formally investigate in this paper. We show that neither mechanism has good incentive properties, and we develop simple, non-truthful strategies that airlines can use. Our empirical results show that for the scaled airline preferences mechanism, the best performing strategy depends greatly on the extent to which fairness is enforced. For the two-for-two trades mechanism, a simple threshold strategy can yield significant cost savings relative to the best-response strategy, and system efficiency increases when all airlines use the threshold strategy in equilibrium.