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Competition in Multi-Modal Transport Networks: A Dynamic Approach

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  • Adriaan Hendrik van der Weijde

    (VU University Amsterdam)

  • Erik T. Verhoef

    (VU University Amsterdam)

  • Vincent van den Berg

    (VU University Amsterdam)

Abstract

We analyse the behaviour of market participants in a multi-modal commuter network where roads are not priced, but public transport has a usage fee, which is set while taking the effects on the roads into account. In particular, we analyse the difference between markets with a monopolistic public transport operator, which operates all public transport links, and markets in which separate operators own each public transport link. To do so, we consider a simple transport network consisting of two serial segments and two parallel congestible modes of transport. We obtain a reduced form of the public transport operator's optimal fare setting problem and show that, even if the total travel demand is inelastic, serial Bertrand-Nash competition on the public transport links leads to different fares than a serial monopoly; a result not observed in a static model. This results from the fact that trip timing decisions, and therefore the generalized prices of all commuters, are influenced by all fares in the network. We then use numerical simulations to show that, contrary to the results obtained in classic studies on vertical competition, monopolistic fares are not always higher than duopolistic fares; the opposite can also occur. We also explore how different parameters influence the price differential, and how this affects welfare.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-116/VIII.

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Date of creation: 01 Nov 2012
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Handle: RePEc:dgr:uvatin:20120116

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Web page: http://www.tinbergen.nl

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Keywords: Public transport; congestion; market structure; market design;

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  1. De Borger Bruno & Dunkerley Fay & Proost Stef, 2006. "The interaction between tolls and capacity investment in serial and parallel transport networks," Energy, Transport and Environment Working Papers Series, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment ete0607, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  2. Erik T. Verhoef, 2008. "Private Roads: Auctions and Competition in Networks," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(3), pages 463-493, September.
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  8. Chu Xuehao, 1995. "Endogenous Trip Scheduling: The Henderson Approach Reformulated and Compared with the Vickrey Approach," Journal of Urban Economics, Elsevier, vol. 37(3), pages 324-343, May.
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  12. Richard Arnott & Marvin Kraus, 1993. "Financing Capacity On The Bottleneck Model," Boston College Working Papers in Economics 222, Boston College Department of Economics.
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  14. Li, Zheng & Hensher, David A., 2011. "Crowding and public transport: A review of willingness to pay evidence and its relevance in project appraisal," Transport Policy, Elsevier, vol. 18(6), pages 880-887, November.
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Cited by:
  1. Adriaan Hendrik van der Weijde, 2014. "Price Differentiation and Discrimination in Transport Networks," Tinbergen Institute Discussion Papers 14-099/VIII, Tinbergen Institute.

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