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

Changmin Jiang, D'Alfonso, Tiziana and Yulai Wan

Transportation Research Part B: Methodological, 2017, vol. 104, issue C, 461-482

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.

Keywords: Airline; Rail; Cooperation; Domestic partnership; International partnership (search for similar items in EconPapers)
Date: 2017
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