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A demand model for domestic air travel in Sweden

Author

Listed:
  • Kopsch, Fredrik

    (KTH)

Abstract

The aim of this study is to estimate the price elasticity of demand for domestic air travel in Sweden. Using national aggregated data on passenger quantities and fares, price elasticities of demand are estimated with an unbalanced, in terms of stationarity, yet well performing model. The analysis also includes estimates of cross-price elasticities for the main transport substitutes to air travel, rail and road. The robustness of the results is enforced by a primitive division of business and leisure travellers. The results indicate that aggregated demand flr domestic air travel in Sweden is fairly elastic (-0.84) in the short-run and more elastic (-1.13) in the long-run. The robustness test of the model show that leisere travellers, as defined in the data, are more sensitive to price changes than are business travellers. Furthermore, the cross price elasticity between rail and air travel is found to be 0.44.

Suggested Citation

  • Kopsch, Fredrik, 2011. "A demand model for domestic air travel in Sweden," Working papers in Transport Economics 2011:8, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    • Handle: RePEc:hhs:ctswps:2011_008
    as

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    File URL: http://www.transportportal.se/SWoPEc/CTS2011-8.pdf
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    References listed on IDEAS

    as
    1. Pagan, Adrian R & Wickens, M R, 1989. "A Survey of Some Recent Econometric Methods," Economic Journal, Royal Economic Society, vol. 99(398), pages 962-1025, December.
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    3. Mason, Keith J., 2005. "Observations of fundamental changes in the demand for aviation services," Journal of Air Transport Management, Elsevier, vol. 11(1), pages 19-25.
    4. Brons, Martijn & Pels, Eric & Nijkamp, Peter & Rietveld, Piet, 2002. "Price elasticities of demand for passenger air travel: a meta-analysis," Journal of Air Transport Management, Elsevier, vol. 8(3), pages 165-175.
    5. John Baffes, 1997. "Explaining stationary variables with non-stationary regressors," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 69-75.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Aviation; elasticity; transport; demand;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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