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The effect of rail travel time on airline fares: First evidence from the Italian passenger market

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  • Capozza, Claudia

Abstract

The empirical evidence shows that travel time is crucial for rail transport to be a competitor to air transport. However, there are no papers testing whether travel time has a direct effect on airline pricing. This paper is a step towards filling this gap. We test and quantify the effect of rail travel time on airline fares, using unique data at flight-level. We find that airlines design pricing strategies taking into consideration the travel time of competing rail transport service. Airlines are found to set, on average, higher fares as rail travel time increases. However, the competitive pressure induced by rail travel time is perceived by airlines only as the day of departure gets closer: from the 40th to the day before departure it increases while it gradually decreases as the departure date gets further away.

Suggested Citation

  • Capozza, Claudia, 2016. "The effect of rail travel time on airline fares: First evidence from the Italian passenger market," Economics of Transportation, Elsevier, vol. 6(C), pages 18-24.
  • Handle: RePEc:eee:ecotra:v:6:y:2016:i:c:p:18-24
    DOI: 10.1016/j.ecotra.2016.06.002
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    References listed on IDEAS

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    1. Dobruszkes, Frédéric, 2011. "High-speed rail and air transport competition in Western Europe: A supply-oriented perspective," Transport Policy, Elsevier, vol. 18(6), pages 870-879, November.
    2. Gaggero, Alberto A. & Piga, Claudio A., 2010. "Airline competition in the British Isles," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 270-279, March.
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    13. Behrens, Christiaan & Pels, Eric, 2012. "Intermodal competition in the London–Paris passenger market: High-Speed Rail and air transport," Journal of Urban Economics, Elsevier, vol. 71(3), pages 278-288.
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    1. repec:eee:trapol:v:81:y:2019:i:c:p:a1-a19 is not listed on IDEAS
    2. repec:eee:ecotra:v:19:y:2019:i:c:3 is not listed on IDEAS
    3. repec:eee:retrec:v:72:y:2018:i:c:p:49-64 is not listed on IDEAS
    4. repec:eee:retrec:v:74:y:2019:i:c:p:77-92 is not listed on IDEAS
    5. repec:eee:trapol:v:78:y:2019:i:c:p:8-18 is not listed on IDEAS
    6. repec:eee:transb:v:114:y:2018:i:c:p:99-130 is not listed on IDEAS
    7. Li, Xue-yan & Li, Xue-mei & Li, Xue-wei & Qiu, He-ting, 2017. "Multi-agent fare optimization model of two modes problem and its analysis based on edge of chaos," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 405-419.
    8. Daniel Albalate & Mattia Borsati, 2019. "“On the modal shift from motorway to high-speed rail: evidence from Italy”," IREA Working Papers 201910, University of Barcelona, Research Institute of Applied Economics, revised Jun 2019.
    9. Xia, Wenyi & Zhang, Anming, 2016. "High-speed rail and air transport competition and cooperation: A vertical differentiation approach," Transportation Research Part B: Methodological, Elsevier, vol. 94(C), pages 456-481.
    10. repec:eee:jaitra:v:80:y:2019:i:c:4 is not listed on IDEAS

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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