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Relationships between fares, trip length and market competition

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  • Clark, Derek J.
  • Jørgensen, Finn
  • Mathisen, Terje Andreas

Abstract

This paper analyses equilibrium fares that arise from Collusion, Cournot, Stackelberg, Bertrand and Sequential Price Competition when two profit maximising transport firms produce symmetrically differentiable services and have identical costs. Special focus is placed on how different equilibrium fares are linked to trip length. Higher operator costs and higher demand from the authorities regarding the quality of transport supply result in steeper relationships (larger rate of change) between all fares and travel distance. Also, a higher degree of substitutability between the services will in most cases make these relationships steeper. The competitive situation has less influence on fares, both absolutely and relatively, the longer routes the operators compete on.

Suggested Citation

  • Clark, Derek J. & Jørgensen, Finn & Mathisen, Terje Andreas, 2011. "Relationships between fares, trip length and market competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 611-624, August.
    • Handle: RePEc:eee:transa:v:45:y:2011:i:7:p:611-624
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    References listed on IDEAS

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    Cited by:

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    5. Yen, Barbara T.H. & Mulley, Corinne & Tseng, Wen-Chun, 2018. "Inter-modal competition in an urbanised area: Heavy rail and busways," Research in Transportation Economics, Elsevier, vol. 69(C), pages 77-85.
    6. Clark, Derek J. & Mathisen, Terje Andreas, 2020. "Salience in a simple transport market," Research in Transportation Economics, Elsevier, vol. 82(C).
    7. de Rus, Ginés & Socorro, M. Pilar, 2014. "Access pricing, infrastructure investment and intermodal competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 374-387.
    8. Li, Xue-yan & Li, Xue-mei & Li, Xue-wei & Qiu, He-ting, 2017. "Multi-agent fare optimization model of two modes problem and its analysis based on edge of chaos," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 405-419.
    9. Clark, Derek John & Jørgensen, Finn & Mathisen, Terje Andreas, 2014. "Competition in complementary transport services," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 146-159.

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