Intercity coach liberalisation in Italy: Fares determinants in an evolving market

A recent wave of liberalisation in the coach sector has reached some of the largest European countries. Liberalisation has shown deep consequences not only on the coach market structure, historically rather static and with limited market share, but also in the general market of long-distance passenger transport. In this context Italy is an interesting case, presenting some peculiarities with respect to comparable countries such as France and Germany. Italian market in fact had a relevant dimension even before liberalisation, but was concentrated on marginal origin-destination relationships. The liberalisation has pushed coach companies, mostly newcomers, to look at the richer intercity markets, especially in Northern Italy. Thanks to a 1-year long database of prices for most of Italian domestic routes, the paper studies the price determinants, including the strategy of main companies and the effect of intermodal competition. Results show that newcomers' strategy is relatively more aggressive than incumbents' one, but also that some of the largest historical operators also effectively reduce average route prices with promotions and yield management. Also intermodal competition matters. Routes overlapping with rail PSO are priced less, but interestingly this happens also for high-speed routes. This shows that the two markets are not independent.