A sealed-bid combinatorial auction is developed for the allocation of airport time slots to competing airlines. This auction procedure permits airlines to submit various contingency bids for flight-compatible combinations of individual airport landing or take-off slots. An algorithm for solving the resulting set-packing problem yields an allocation of slots to packages that maximizes the system surplus as revealed by the set of package bids submitted. The algorithm determines individual (slot) resource prices which are used to price packages to the winning bidders at levels guaranteed to be no greater (and normally smaller) than the amounts bid. Laboratory experiments with cash motivated subjects are used to study the efficiency and demand revelation properties of the combinatorial auction in comparison with a proposed independent slot primary auction . The problem of allocating airport slots ▪ In 1968 the FAA adopted a high density rule for the allocation of scarce landing and take-off slots at four major airports (La Guardia, Washington National, Kennedy International, and O'Hare International). This rule establishes slot quotas for the control of airspace congestion at these airports. Airport runway slots, regulated by these quotas, have a distinguishing feature which any proposed allocation procedure must accommodate: an airline's demand for a takeoff slot at a flight originating airport is not independent of its demand for a landing slot at the flight destination airport.
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