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Air-rail cooperation: Partnership level, market structure and welfare implications

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  • Jiang, Changmin
  • D'Alfonso, Tiziana
  • Wan, Yulai

Abstract

We build a theoretical model to study different air-rail cooperation scenarios. We investigate two possible air-rail partnerships between a rail operator and either a domestic airline or a foreign airline. When a partnership is formed, an investment to improve the air-rail connecting service is allowed at a cost before the service is launched. We find that the cooperation level, the equilibrium partnership scenarios when air-rail cooperation is exclusive or non-exclusive, as well as the comparisons of social welfare under different partnership scenarios, all depend on the pre-investment quality of air-rail service compared with the quality of air-air service. We further apply our model to the real-life case of Strasbourg-Paris-Dubai market, showing that other factors, such as price sensitivity of demand, horizontal differentiation between air and rail, and asymmetries in partnership investment costs, also affect cooperation level.

Suggested Citation

  • Jiang, Changmin & D'Alfonso, Tiziana & Wan, Yulai, 2017. "Air-rail cooperation: Partnership level, market structure and welfare implications," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 461-482.
  • Handle: RePEc:eee:transb:v:104:y:2017:i:c:p:461-482
    DOI: 10.1016/j.trb.2017.01.006
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    5. Bergantino, Angela Stefania & Madio, Leonardo, 2020. "Intermodal competition and substitution. HSR versus air transport: Understanding the socio-economic determinants of modal choice," Research in Transportation Economics, Elsevier, vol. 79(C).
    6. Wang, Wei & Sun, Huijun & Wu, Jianjun, 2020. "How does the decision of high-speed rail operator affect social welfare? Considering competition between high-speed rail and air transport," Transport Policy, Elsevier, vol. 88(C), pages 1-15.
    7. Su, Min & Luan, Weixin & Sun, Tianyao, 2019. "Effect of high-speed rail competition on airlines’ intertemporal price strategies," Journal of Air Transport Management, Elsevier, vol. 80(C), pages 1-1.
    8. Alessandro Avenali & Tiziana D'Alfonso & Alberto Nastasi & Pierfrancesco Reverberi, 2019. "High-speed rail and air transport integration in hub-and-spoke networks. The role of airports," DIAG Technical Reports 2019-09, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    9. Su, Min & Luan, Weixin & Fu, Xiaowen & Yang, Zaili & Zhang, Rui, 2020. "The competition effects of low-cost carriers and high-speed rail on the Chinese aviation market," Transport Policy, Elsevier, vol. 95(C), pages 37-46.
    10. Chen, Cheng & D'Alfonso, Tiziana & Guo, Huanxiu & Jiang, Changmin, 2018. "Graph theoretical analysis of the Chinese high-speed rail network over time," Research in Transportation Economics, Elsevier, vol. 72(C), pages 3-14.
    11. Avenali, Alessandro & Bracaglia, Valentina & D’Alfonso, Tiziana & Reverberi, Pierfrancesco, 2017. "Benefits and costs of vertical agreements between airlines and high-speed rail operators," Working Papers 17_5, SIET Società Italiana di Economia dei Trasporti e della Logistica.
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    13. Zheng, Longfei & Long, Fenjie & Chang, Zheng & Ye, Jingsong, 2019. "Ghost town or city of hope? The spatial spillover effects of high-speed railway stations in China," Transport Policy, Elsevier, vol. 81(C), pages 230-241.

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