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Demand Shocks, Airline Pricing, and High-speed Rail Substitution: Evidence from the Chinese Market

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  • Feng Wei
  • Jihui Chen
  • Lan Zhang

Abstract

We study the high-speed rail (HSR) substitution for air travel through the demand shocks triggered by two events: the launch of Beijing–Shanghai high-speed railways (the Jing-hu HSRs) and theWenzhou train accident. Using a difference-in-difference approach, we find that, compared to those in the control group, mean airfares for routes along the Jing-hu HSRs decline by 30.6 per cent upon the launch, but rebound by 27.6 per cent following the accident. Furthermore, the two events have a larger impact on low-cost carriers and regional airlines, on tourism routes, and on flights that depart during evening hours than their counterparts.

Suggested Citation

  • Feng Wei & Jihui Chen & Lan Zhang, 2017. "Demand Shocks, Airline Pricing, and High-speed Rail Substitution: Evidence from the Chinese Market," Journal of Transport Economics and Policy, University of Bath, vol. 51(4), pages 266-26-289.
    • Handle: RePEc:tpe:jtecpo:2017:51:4:266--289
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