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A Hotelling Model with Price-sensitive Demand and Asymmetric Distance Costs The Case of Strategic Transport Scheduling

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  • Adriaan Hendrik van der Weijde
  • Erik T. Verhoef
  • Vincent A. C. van den Berg

Abstract

We analyse the scheduling decisions of competing transport operators, using a horizontal differentiation model with price-sensitive demand and asymmetric distance costs. Two competitors choose fares and departure times in a fixed time interval; consumers' locations indicate their desired departure times. Locations are chosen before prices; we show that the opposite order, like a simultaneous game, does not have a Nash equilibrium. We also discuss Stackelberg games and second-best regulation. Our results show how departure times can be strategic instruments. Services are scheduled closer together than optimal. Optimal regulatory strategies depend on commitment possibilities, and on the value of schedule delay. © 2014 LSE and the University of Bath

Suggested Citation

  • Adriaan Hendrik van der Weijde & Erik T. Verhoef & Vincent A. C. van den Berg, 2014. "A Hotelling Model with Price-sensitive Demand and Asymmetric Distance Costs The Case of Strategic Transport Scheduling," Journal of Transport Economics and Policy, University of Bath, vol. 48(2), pages 261-277, May.
    • Handle: RePEc:tpe:jtecpo:v:48:y:2014:i:2:p:261-277
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    Cited by:

    1. Paul Koster & Eric Pels & Erik Verhoef, 2016. "The User Costs of Air Travel Delay Variability," Transportation Science, INFORMS, vol. 50(1), pages 120-131, February.
    2. Brand, Christina & Sieg, Gernot, 2020. "The impact of delays on the welfare effects of on-track competition: The case of transfer passengers with operator-tied tickets," Research in Transportation Economics, Elsevier, vol. 80(C).
    3. de Palma, André & Ordás Criado, Carlos & Randrianarisoa, Laingo M., 2018. "When Hotelling meets Vickrey. Service timing and spatial asymmetry in the airline industry," Journal of Urban Economics, Elsevier, vol. 105(C), pages 88-106.
    4. Gutiérrez-Hita, Carlos & de la Cruz, Omar & Ramos-Melero, Rodolfo, 2022. "Infrastructure access charges, service differentiation, and strategic competition in the EU railway passenger market," Transportation Research Part B: Methodological, Elsevier, vol. 164(C), pages 87-104.
    5. Yiquan Gu & Alexander Rasch & Tobias Wenzel, 2016. "Price-sensitive demand and market entry," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 865-875, November.
    6. Giat, Yahel & Manes, Eran, 2023. "Firm response to ethically motivated boycotts," European Journal of Operational Research, Elsevier, vol. 305(1), pages 300-311.
    7. Zhou, Yanju & Che, Yuan, 2021. "Research on Government Logistics Subsidies for Poverty Alleviation with Non-uniform Distribution of Consumers," Omega, Elsevier, vol. 104(C).

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