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Scheduled service versus personal transportation: the role of distance

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  • Volodymir BilotKach
  • Xavier Fageda
  • Ricardo Flores-Fillol

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.

Suggested Citation

  • Volodymir BilotKach & Xavier Fageda & Ricardo Flores-Fillol, 2009. "Scheduled service versus personal transportation: the role of distance," Working Papers 2009-10, FEDEA.
    • Handle: RePEc:fda:fdaddt:2009-10
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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