Airline Schedule Competition
ABSTRACT This paper presents a simple model of airline schedule competition that circumvents the complexities of the spatial approach used in earlier papers. Consumers choose between two duopoly carriers, each of which has evenly spaced flights, by comparing the combinations of fare and expected schedule delay that they offer. In contrast to the spatial approach, the particular departure times of individual flights are thus not relevant. The model generates a number of useful comparative-static predictions, while welfare analysis shows that equilibrium flight frequencies tend to be inefficiently low.
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ABSTRACT: I investigate the incentives for vertical integration in the railway industry in Europe, consisting of transportation service and the physical network infrastructure. I focus not only on firms decisions but also look on the incentives of national legislators. The analysis shows that the incentives for vertical integration crucially depends on the importance of cross-border transportation. If the importance for cross-border transportation is sufficiently high, national legislators may choose an integrated industry structure. I show that this involves a coordination problem and that national legislators would be better off coordinating on separated industry structures across Europe. I believe that this problem justifies major policy initiatives by the European Union but also explains actions of national legislators in implementing these initiatives.08/2011;
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ABSTRACT: This paper develops a simple analytical model of price and frequency competition among freight carriers. In the model, the full price faced by a shipper (a goods producer) includes the actual shipping price plus an inventory holding cost, which is inversely proportional to the frequency of shipments offered by the freight car-rier. Taking brand loyalty on the part of shippers into account, competing freight carriers maximize profit by setting prices, frequencies and vehicle carrying capaci-ties. Assuming tractable functional forms, long-and short-run comparative-static results are derived to show how the choice variables are affected by the model's parameters. The paper also provides an efficiency analysis, comparing the equilib-rium to the social optimum, and it attempts to explain the phenomenon of excess capacity in the freight industry.07/2011;
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ABSTRACT: This paper investigates and compares airport pricing policies under various types of competition, considering both per-passenger and per-flight charges at congested airports. We show that an airport requires both pricing instruments to achieve the first-best outcome, and we distinguish their role by showing that congestion externalities need to be addressed through per-flight tolls whereas the inefficiency caused by airlines' market power exertion must be corrected with per-passenger subsidies. We also show that Bertrand competition with differentiated products, a type of behavior recently pointed out by the empirical literature as pertinent, has policy implications that diverge from analyses that assume Cournot competition. The welfare gains and congestion reductions of congestion pricing would be higher than what has been advanced before; the degree of self-financing of airport infrastructure under optimal pricing would be increased and may approach exact self-financing; and the implied differentiation of charges between (asymmetric) airlines would be significantly smaller, presumably enhancing the political feasibility of welfare maximizing congestion pricing, as the potential distributional concerns would be decreased. Finally, we numerically analyze second-best policies, and find that atomistic pricing may offer a relatively attractive alternative to first-best congestion pricing.Journal of Public Economics 10/2013; 106:1-13. · 1.46 Impact Factor