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Relationships between fares, trip length and market competition


  • Clark, Derek J.
  • Jørgensen, Finn
  • Mathisen, Terje Andreas


This paper analyses equilibrium fares that arise from Collusion, Cournot, Stackelberg, Bertrand and Sequential Price Competition when two profit maximising transport firms produce symmetrically differentiable services and have identical costs. Special focus is placed on how different equilibrium fares are linked to trip length. Higher operator costs and higher demand from the authorities regarding the quality of transport supply result in steeper relationships (larger rate of change) between all fares and travel distance. Also, a higher degree of substitutability between the services will in most cases make these relationships steeper. The competitive situation has less influence on fares, both absolutely and relatively, the longer routes the operators compete on.

Suggested Citation

  • Clark, Derek J. & Jørgensen, Finn & Mathisen, Terje Andreas, 2011. "Relationships between fares, trip length and market competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 611-624, August.
  • Handle: RePEc:eee:transa:v:45:y:2011:i:7:p:611-624

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    References listed on IDEAS

    1. Finn Jørgensen & John Preston, 2007. "The Relationship Between Fare and Travel Distance," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 451-468, September.
    2. Jørgensen, Finn & Pedersen, Pål Andreas, 2004. "Travel distance and optimal transport policy," Transportation Research Part B: Methodological, Elsevier, vol. 38(5), pages 415-430, June.
    3. Helge Sanner, 2007. "Bertrand Competition Can Yield Higher Prices Than Monopoly," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 247-254, July.
    4. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    5. Paulley, Neil & Balcombe, Richard & Mackett, Roger & Titheridge, Helena & Preston, John & Wardman, Mark & Shires, Jeremy & White, Peter, 2006. "The demand for public transport: The effects of fares, quality of service, income and car ownership," Transport Policy, Elsevier, vol. 13(4), pages 295-306, July.
    6. Banister, David & Berechman, Joseph & De Rus, Gines, 1992. "Competitive regimes within the European bus industry: Theory and practice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 26(2), pages 167-178, March.
    7. Derek J. Clark & Finn Jørgensen & Pål A. Pedersen, 2009. "Strategic Interactions between Transport Operators with Several Goals," Journal of Transport Economics and Policy, University of Bath, vol. 43(3), pages 385-403, September.
    8. Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
    9. Kjell G. Salvanes & Frode Steen & Lars Sørgard, 2003. "Collude, Compete, or Both? Deregulation in the Norwegian Airline Industry," Journal of Transport Economics and Policy, University of Bath, vol. 37(3), pages 383-416, September.
    10. Jørgensen, Finn & Pedersen, Hassa & Solvoll, Gisle, 2004. "Ramsey pricing in practice: the case of the Norwegian ferries," Transport Policy, Elsevier, vol. 11(3), pages 205-214, July.
    11. Nash, C A, 1993. "British Bus Deregulation," Economic Journal, Royal Economic Society, vol. 103(419), pages 1042-1049, July.
    12. Hensher, David A. & Stanley, John, 2003. "Performance-based quality contracts in bus service provision," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(6), pages 519-538, July.
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    Cited by:

    1. Socorro, M. Pilar & Viecens, M. Fernanda, 2013. "The effects of airline and high speed train integration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 160-177.
    2. de Rus, Ginés & Socorro, M. Pilar, 2014. "Access pricing, infrastructure investment and intermodal competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 374-387.
    3. Jørgensen, Finn & Santos, Georgina, 2014. "Charges on transport – To what extent are they passed on to users?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 69(C), pages 183-195.
    4. 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.
    5. Clark, Derek John & Jørgensen, Finn & Mathisen, Terje Andreas, 2014. "Competition in complementary transport services," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 146-159.


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