Targeted policy design in transportation: the case of the ferry market
AbstractWe model a ferry market where passengers are heterogeneous in their valuation of waiting time and, unlike in previous studies, can take services from all operators. Analyzing their behavior when two operators are active, each providing one service, we find that complex patterns of product differentiation emerge between two goods that (i) do not exactly correspond to the available services and (ii) display service frequencies as quality attributes. A (low-quality) basic good, coinciding with the cheaper service, attracts low-time-value passengers. A (high-quality) composite good, which is a bundle of the two available services, appeals to high-time-value passengers. Consequently, demand is positive for either operator so that an inefficient operator is not crowded out. In the specific case of a mixed duopoly, a price-aggressive public operator spans discipline over (but does not monopolize) the whole market; a soft one boosts "quality" (i.e., frequency) vis-à-vis fraction of the population only, that is yet larger than under classical vertical differentiation. Policy-makers pursuing redistribution objectives should target the cheaper service, in general, privileging either a raise in its frequency (when it is low) or a cut in its price (when frequency is high), depending upon the group of passengers they wish to support.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by SIET Società Italiana di Economia dei Trasporti e della Logistica in its series Working Papers with number 1205.
Length: 30 pages
Date of creation: 2012
Date of revision: 2012
Ferry market; Price and frequency; Time value; Passenger allotment; Product differentiation; Redistribution;
Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bergantino, Angela Stefania & de Villemeur, Étienne & Vinella, Annalisa, 2007.
"Partial Regulation in Vertically Differentiated Industries,"
IDEI Working Papers
502, Institut d'Économie Industrielle (IDEI), Toulouse, revised Apr 2010.
- Angela S. Bergantino & Etienne Billette De Villemeur & Annalisa Vinella, 2011. "Partial Regulation in Vertically Differentiated Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 255-287, 04.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979.
"Price competition, quality and income disparities,"
Journal of Economic Theory,
Elsevier, vol. 20(3), pages 340-359, June.
- Acutt, MZ & Dodgson, JS, 1995. "Cross-elasticities of demand for travel," Transport Policy, Elsevier, vol. 2(4), pages 271-277, October.
- Peran van Reeven, 2008. "Subsidisation of Urban Public Transport and the Mohring Effect," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(2), pages 349-359, May.
- Yang, Hai & Yan Kong, Hoi & Meng, Qiang, 2001. "Value-of-time distributions and competitive bus services," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(6), pages 411-424, December.
- Mohring, Herbert, 1972. "Optimization and Scale Economies in Urban Bus Transportation," American Economic Review, American Economic Association, vol. 62(4), pages 591-604, September.
- Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
- McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
- Leurent, Fabien, 1993. "Cost versus time equilibrium over a network," European Journal of Operational Research, Elsevier, vol. 71(2), pages 205-221, December.
- Herbert Mohring & John Schroeter & Paitoon Wiboonchutikula, 1987.
"The Values of Waiting Time, Travel Time, and a Seat on a Bus,"
RAND Journal of Economics,
The RAND Corporation, vol. 18(1), pages 40-56, Spring.
- Mohring, Herbert & Schroeter, John R. & Wiboonchutikula, Paitoon, 1987. "The Values of Waiting Time, Travel Time, and a Seat on a Bus," Staff General Research Papers 11117, Iowa State University, Department of Economics.
- Billette de Villemeur, Etienne, 2004. "Regulation in the air: price-and-frequency caps," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(6), pages 465-476, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Edoardo Marcucci).
If references are entirely missing, you can add them using this form.