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Customer choice patterns in passenger rail competition

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  • Paha, Johannes
  • Rompf, Dirk
  • Warnecke, Christiane

Abstract

This study explores determinants of customer choice behaviour in passenger rail competition on two cross-border routes, Cologne–Brussels and Cologne–Amsterdam. It fills a gap in the literature on competition in commercial passenger rail by relying on newly collected stated preference data from about 700 on-train interviews. Our multinomial Logit estimations reveal two important effects that are closely connected to (psychological) switching costs. First, the customers on the route Cologne–Amsterdam, for whom competition is a purely hypothetical situation, value a competitive market structure lower than customers on the already competitive route Cologne–Brussels. Second, travellers show a status quo bias with a preference for the service provider on whose trains they were interviewed. This effect goes beyond the impact exercised by explanatory variables capturing the observable differences of the services and customers, including loyalty-enhancing effects like the possession of customer cards. Our results imply that entry into the commercial passenger rail market may be more difficult than often thought. Thus, the study contributes to explaining the low level of competition in these markets in Europe.

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Bibliographic Info

Article provided by Elsevier in its journal Transportation Research Part A: Policy and Practice.

Volume (Year): 50 (2013)
Issue (Month): C ()
Pages: 209-227

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Handle: RePEc:eee:transa:v:50:y:2013:i:c:p:209-227

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Related research

Keywords: Competition; Passenger; Rail; Transport; Discrete choice; Multinomial Logit;

References

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  1. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
  2. Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring.
  3. Mark Bradley, 2009. "Important Stated Preference Experimental Design Issues in Recent Transportation Applications," Transport Reviews, Taylor & Francis Journals, vol. 29(5), pages 657-663, March.
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  6. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
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  8. Christiane Warnecke & Georg Goetz, 2012. "Offener Marktzugang im europäischen Schienenpersonenverkehr: Erfahrungen aus der Wettbewerbsentwicklung," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(1), pages 111-130.
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  11. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  12. Marc Ivaldi & Catherine Vibes, 2008. "Price Competition in the Intercity Passenger Transport Market: A Simulation Model," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(2), pages 225-254, May.
  13. Friebel Guido & Niffka Marko, 2009. "The Functioning of Inter-modal Competition in the Transportation Market: Evidence from the Entry of Low-cost Airlines in Germany," Review of Network Economics, De Gruyter, vol. 8(2), pages 1-23, June.
  14. Román, Concepción & Espino, Raquel & Martín, Juan Carlos, 2007. "Competition of high-speed train with air transport: The case of Madrid–Barcelona," Journal of Air Transport Management, Elsevier, vol. 13(5), pages 277-284.
  15. Fredrik Carlsson & �sa Lofgren, 2006. "Airline choice, switching costs and frequent flyer programmes," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1469-1475.
  16. Behrens, Christiaan & Pels, Eric, 2012. "Intermodal competition in the London–Paris passenger market: High-Speed Rail and air transport," Journal of Urban Economics, Elsevier, vol. 71(3), pages 278-288.
  17. Tae H. Oum & Waters, W.G. & Jong Say Yong, 1990. "A survey of recent estimates of price elasticities of demand for transport," Policy Research Working Paper Series 359, The World Bank.
  18. John Preston, 2009. "Competition for Long Distance Passenger Rail Services: The Emerging Evidence," OECD/ITF Joint Transport Research Centre Discussion Papers 2009/23, OECD Publishing.
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