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Scheduled service versus personal transportation: the role of distance

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Author Info
Volodymir BilotKach
Xavier Fageda
Ricardo Flores-Fillol

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Abstract

This paper presents a theoretical and empirical analysis of the relationship between frequency of scheduled transportation services and their substitutability with personal transportation (using distance as a proxy). We study the interaction between a monopoly firm providing a high speed Scheduled service and private transportation (i.e., car). Interestingly, the carrier chooses to increase the frequency of service on longer routes when competing with personal transportation because by providing higher frequency (at extra cost) it can also charge higher fares which can boost its profits. However, in line with the results of earlier studies, frequency decreases for longer flights when driving is not a viable option. An empirical application of our analysis to the European airline industry confirms the predictions of our theoretical model.

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Paper provided by FEDEA in its series Working Papers with number 2009-10.

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Date of creation: Feb 2009
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Handle: RePEc:fda:fdaddt:2009-10

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  1. Baum-Snow, Nathaniel & Kahn, Matthew E., 2000. "The effects of new public projects to expand urban rail transit," Journal of Public Economics, Elsevier, vol. 77(2), pages 241-263, August. [Downloadable!] (restricted)
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  5. Combes, Pierre-Philippe & Linnemer, Laurent, 2000. "Intermodal competition and regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 131-184, March. [Downloadable!] (restricted)
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  7. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter. [Downloadable!] (restricted)
  9. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law & Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
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  11. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer, vol. 28(4), pages 379-399, June. [Downloadable!] (restricted)
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  12. Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Blackwell Publishing, vol. 43(2), pages 141-59, June. [Downloadable!] (restricted)
  13. Ricardo Flores-Fillol, 2007. "Airline Competition and Network Structure," UFAE and IAE Working Papers 683.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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  15. Fredrik Carlsson, 2004. "Prices and Departures in European Domestic Aviation Markets," Review of Industrial Organization, Springer, vol. 24(1), pages 37-49, 02. [Downloadable!]
  16. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May. [Downloadable!] (restricted)
  17. Salvanes, Kjell G. & Steen, Frode & Sorgard, Lars, 2005. "Hotelling in the air? Flight departures in Norway," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 193-213, March. [Downloadable!] (restricted)
  18. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 2002. "European Airline Reform: An Empirical Welfare Analysis," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(2), pages 189-209, May. [Downloadable!] (restricted)
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