IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v40y2010i1p60-72.html
   My bibliography  Save this article

Scheduled service versus personal transportation: The role of distance

Author

Listed:
  • Bilotkach, Volodymyr
  • Fageda, Xavier
  • Flores-Fillol, Ricardo

Abstract

This paper presents a theoretical and empirical analysis of the relationship between frequency of scheduled transportation services and their substitutability with personal transportation (using distance as a proxy). We study the interaction between a monopoly firm providing a high-speed scheduled service and private transportation (i.e., car). Interestingly, the carrier chooses to increase the frequency of service on longer routes when competing with personal transportation because by providing higher frequency (at extra cost) it can also charge higher fares which can boost its profits. However, in line with the results of earlier studies, frequency decreases for longer flights when driving is not a viable option. An empirical application of our analysis to the European airline industry confirms the predictions of our theoretical model.

Suggested Citation

  • Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2010. "Scheduled service versus personal transportation: The role of distance," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 60-72, January.
    • Handle: RePEc:eee:regeco:v:40:y:2010:i:1:p:60-72
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166-0462(09)00087-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(4), pages 379-399, June.
    4. 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.
    5. Youdi Schipper & Piet Rietveld & Peter Nijkamp, 2002. "European Airline Reform: An Empirical Welfare Analysis," Journal of Transport Economics and Policy, University of Bath, vol. 36(2), pages 189-209, May.
    6. 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.
    7. Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J. & Álvarez-SanJaime, Óscar, 2009. "Alternative pricing regimes in interurban passenger transport with externalities and modal competition," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 128-137, March.
    8. Javier Asensio, 2002. "Transport Mode Choice by Commuters to Barcelona's CBD," Urban Studies, Urban Studies Journal Limited, vol. 39(10), pages 1881-1895, September.
    9. Combes, Pierre-Philippe & Linnemer, Laurent, 2000. "Intermodal competition and regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 131-184, March.
    10. Jan K. Brueckner, 2004. "Network Structure and Airline Scheduling," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 291-312, June.
    11. Bel, Germà, 1997. "Changes in travel time across modes and its impact on the demand for inter-urban rail travel," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 43-52, March.
    12. Marin, Pedro L, 1995. "Competition in European Aviation: Pricing Policy and Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 141-159, June.
    13. 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).
    14. Wei, Wenbin & Hansen, Mark, 2007. "Airlines' competition in aircraft size and service frequency in duopoly markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 43(4), pages 409-424, July.
    15. Fredrik Carlsson, 2004. "Prices and Departures in European Domestic Aviation Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(1), pages 37-49, February.
    16. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
    17. Flores-Fillol, Ricardo, 2009. "Airline competition and network structure," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 966-983, December.
    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.
    19. Damien J. Neven & Lars‐Hendrik Röller & Zhentang Zhang, 2006. "Endogenous Costs And Price‐Cost Margins: An Application To The European Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 54(3), pages 351-368, September.
    20. Berry, Steven T, 1990. "Airport Presence as Product Differentiation," American Economic Review, American Economic Association, vol. 80(2), pages 394-399, May.
    21. 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.
    22. Jan Brueckner & Ricardo Flores-Fillol, 2007. "Airline Schedule Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 161-177, May.
    23. 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.
    24. Bilotkach Volodymyr, 2009. "A Framework for Modeling "Real-Life" Airline Networks," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-16, September.
    25. Mar González-Savignat, 2004. "Competition in Air Transport," Journal of Transport Economics and Policy, University of Bath, vol. 38(1), pages 77-107, January.
    26. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    2. Fageda, Xavier & Flores-Fillol, Ricardo, 2012. "Air services on thin routes: Regional versus low-cost airlines," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 702-714.
    3. Fageda, Xavier, 2014. "What hurts the dominant airlines at hub airports?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 177-189.
    4. Cattaneo, Mattia & Malighetti, Paolo & Redondi, Renato & Salanti, Andrea, 2018. "Changes in frequencies and price variations on point-to-point routes: The case of easyJet," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 60-70.
    5. Fageda, Xavier & Jiménez, Juan Luis & Perdiguero, Jordi & Marrero, Kevin, 2017. "Does market exit of a network airline affect airline prices and frequencies on tourist routes?," Tourism Management, Elsevier, vol. 61(C), pages 465-471.
    6. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
    7. Bet, Germán, 2021. "Product specification under a threat of entry: Evidence from Airlines’ departure times," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    8. Tsunoda, Yushi, 2018. "Transportation policy for high-speed rail competing with airlines," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 350-360.
    9. Anming Zhang & Yimin Zhang & Joseph A. Clougherty, 2011. "Competition and Regulation in Air Transport," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 35, Edward Elgar Publishing.
    10. Kuangnen Cheng & Hui-Ping Chen & Jason Lee, 2015. "Competition behavior in service frequency for U.S. airlines," Service Business, Springer;Pan-Pacific Business Association, vol. 9(1), pages 1-16, March.
    11. Yanhao Wei, 2018. "Airline networks, traffic densities, and value of links," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 341-370, September.
    12. Xavier Fageda, 2006. "Measuring Conduct and Cost Parameters in the Spanish Airline Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(4), pages 379-399, June.
    13. Fageda, Xavier & Jiménez, Juan Luis & Valido, Jorge, 2016. "Does an increase in subsidies lead to changes in air fares? Empirical evidence from Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 235-242.
    14. Mark G. Lijesen & Piet Rietveld & Peter Nijkamp, 2000. "Do European Carriers dominate their Hubs?," Tinbergen Institute Discussion Papers 00-071/3, Tinbergen Institute.
    15. Calzada, Joan & Fageda, Xavier, 2014. "Competition and public service obligations in European aviation markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 70(C), pages 104-116.
    16. Oliveira, Alessandro V.M, 2003. "The Impacts Of Liberalisation On A Brazilian Air Shuttle Market," The Warwick Economics Research Paper Series (TWERPS) 676, University of Warwick, Department of Economics.
    17. Zhang, Anming & Czerny, Achim I., 2012. "Airports and airlines economics and policy: An interpretive review of recent research," Economics of Transportation, Elsevier, vol. 1(1), pages 15-34.
    18. , 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry," Working Papers 950, Queen Mary University of London, School of Economics and Finance.
    19. Lin, Ming Hsin & Zhang, Anming, 2016. "Hub congestion pricing: Discriminatory passenger charges," Economics of Transportation, Elsevier, vol. 5(C), pages 37-48.
    20. Claudio Agostini, 2005. "El Mercado de Transporte Aéreo: Lecciones para Chile de una Revisión de la Literatura," ILADES-UAH Working Papers inv163, Universidad Alberto Hurtado/School of Economics and Business.

    More about this item

    Keywords

    Short-haul routes Long-haul routes Flight frequency Distance;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:40:y:2010:i:1:p:60-72. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.