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Split incentive problem in the uptake of new ATM technology

Paper ID

ATM-2021-036

Conference

USA/Europe ATM R&D Seminar

Year

2021

Theme

Economics, finance and policy

Project Name

SESAR 2020 ER4 project ITACA

Keywords:

air traffic control, innovation, network effect, split-incentives, technology uptake

Authors

Saskia van der Loo, Christophe Heyndrickx and Eef Delhaye

DOI

Project Number

893443

Abstract

We analyse the problem of split incentives between Air Navigation Service Providers (ANSP) and airlines in adopting disruptive technologies. We develop a simple theoretical model which allow us to analyse the uptake of technologies based on the potential efficiency gains of both the ANSP and the airlines. Next, we illustrate this model numerically. Our first, intuitive, result is that while regulation of navigation fees is necessary, it also hinders the investments in new technologies. Secondly, we see that the uptake of technologies would be faster in a one-to-one setting. Thirdly, it is not certain that increased competition between ANSPs will stimulate innovation. Finally, an overall technological mandate can be welfare improving as it reduces uncertainty.