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Pricing in Overlapping Transport Networks

Author

Listed:
  • Achim I. Czerny
  • Peter-J. Jost
  • Benny Mantin

Abstract

This paper considers a transport network with two firms that operate a parallel service on a hub-to-hub connection and monopoly services on spoke-to-hub connections under increasing returns to scale. We find the following: A symmetric equilibrium cannot occur under independent (non-cooperative) pricing when the number of spoke-tospoke passengers becomes positive. The effect of cooperative pricing on mark-ups in spoke-to-hub, hub-to-hub and spoke-to-spoke markets (where double marginalization can occur) can be positive or negative. Cooperation can reduce total welfare though hub-to-hub markets are small.

Suggested Citation

  • Achim I. Czerny & Peter-J. Jost & Benny Mantin, 2010. "Pricing in Overlapping Transport Networks," WHU Working Paper Series - Economics Group 10-05, WHU - Otto Beisheim School of Management.
    • Handle: RePEc:whu:wpaper:10-05
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    References listed on IDEAS

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    Cited by:

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    3. Yao, Jialing & Sun, Bingbin & Xi, lifeng, 2019. "Fractality of evolving self-similar networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 515(C), pages 211-216.
    4. A. Q. Barbi & G. A. Prataviera, 2017. "Nonlinear dependencies on Brazilian equity network from mutual information minimum spanning trees," Papers 1711.06185, arXiv.org, revised May 2019.

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    More about this item

    Keywords

    Pricing; transport networks; hub-and-spoke; double marginalization; complementarity; cooperation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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