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Air-rail cooperation: Partnership level, market structure and welfare implications

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  • Jiang, Changmin
  • D'Alfonso, Tiziana
  • Wan, Yulai

Abstract

We build a theoretical model to study different air-rail cooperation scenarios. We investigate two possible air-rail partnerships between a rail operator and either a domestic airline or a foreign airline. When a partnership is formed, an investment to improve the air-rail connecting service is allowed at a cost before the service is launched. We find that the cooperation level, the equilibrium partnership scenarios when air-rail cooperation is exclusive or non-exclusive, as well as the comparisons of social welfare under different partnership scenarios, all depend on the pre-investment quality of air-rail service compared with the quality of air-air service. We further apply our model to the real-life case of Strasbourg-Paris-Dubai market, showing that other factors, such as price sensitivity of demand, horizontal differentiation between air and rail, and asymmetries in partnership investment costs, also affect cooperation level.

Suggested Citation

  • Jiang, Changmin & D'Alfonso, Tiziana & Wan, Yulai, 2017. "Air-rail cooperation: Partnership level, market structure and welfare implications," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 461-482.
    • Handle: RePEc:eee:transb:v:104:y:2017:i:c:p:461-482
    DOI: 10.1016/j.trb.2017.01.006
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