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Scheduled service versus personal transportation: the role of distance

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Author Info
Volodymyr Bilotkach (University of California Irvine)
Xavier Fageda (PPRE-IREA, Universitat de Barcelona)
Ricardo Flores-Fillol (Universitat Rovira i Virgili)

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Abstract

This paper analyzes both theoretically and empirically the relationship between distance and frequency of scheduled transportation services. We study the interaction between a monopoly firm providing high-speed scheduled service and personal trans- portation (i.e., car). Most interestingly, the carrier chooses to increase frequency of service on longer routes when competing with personal transportation because provid- ing a higher frequency (at extra cost) it can also charge higher fares that can boost its profits. However, when driving is not a relevant option, frequency of service de- creases for longer flights consistently with prior studies. An empirical application of our analysis to the European airline industry con?rms the predictions of our theoretical model.

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Publisher Info
Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2008-13.

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Length: 45 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:xrp:wpaper:xreap2008-13

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Postal: Espai de Recerca en Economia, Facultat de Ci�ncies Econ�miques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
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Related research
Keywords: Short-haul routes; long-haul routes; flight frequency; distance;

Other versions of this item:

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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References listed on IDEAS
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.:
  1. Baum-Snow, Nathaniel & Kahn, Matthew E., 2000. "The effects of new public projects to expand urban rail transit," Journal of Public Economics, Elsevier, vol. 77(2), pages 241-263, August. [Downloadable!] (restricted)
  2. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July. [Downloadable!] (restricted)
  3. Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-99, May. [Downloadable!] (restricted)
  4. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Voith, Richard, 1997. "Fares, Service Levels, and Demographics: What Determines Commuter Rail Ridership in the Long Run?," Journal of Urban Economics, Elsevier, vol. 41(2), pages 176-197, March. [Downloadable!] (restricted)
  6. Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Blackwell Publishing, vol. 43(2), pages 141-59, June. [Downloadable!] (restricted)
  7. Ricardo Flores-Fillol, 2007. "Airline Competition and Network Structure," UFAE and IAE Working Papers 683.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  8. Fredrik Carlsson, 2004. "Prices and Departures in European Domestic Aviation Markets," Review of Industrial Organization, Springer, vol. 24(1), pages 37-49, 02. [Downloadable!]
  9. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer, vol. 30(3), pages 161-177, May. [Downloadable!] (restricted)
  10. Damien J. Neven & Lars-Hendrik Röller & Zhentang Zhang, 2002. "Endogenous Costs and Price-Cost Margins," Discussion Papers of DIW Berlin 294, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  11. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Blackwell Publishing, vol. 52(2), pages 291-312, 06. [Downloadable!] (restricted)
  12. Combes, Pierre-Philippe & Linnemer, Laurent, 2000. "Intermodal competition and regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 131-184, March. [Downloadable!] (restricted)
  13. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter. [Downloadable!] (restricted)
  14. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law & Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  15. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer, vol. 28(4), pages 379-399, June. [Downloadable!] (restricted)
    Other versions:
  16. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn. [Downloadable!] (restricted)
  17. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December. [Downloadable!] (restricted)
  18. Salvanes, Kjell G. & Steen, Frode & Sorgard, Lars, 2005. "Hotelling in the air? Flight departures in Norway," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 193-213, March. [Downloadable!] (restricted)
  19. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 2002. "European Airline Reform: An Empirical Welfare Analysis," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 36(2), pages 189-209, May. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Volodymyr Bilotkach, 2009. "A Framework for Modeling "Real-Life" Airline Networks," Review of Network Economics, Concept Economics, vol. 8(3), pages 255-270, September. [Downloadable!]
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