Intermodal competition and regional inequalities

Laurent Linnemer and Pierre-Philippe Combes

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Abstract: In a model à la Hotelling with discriminatory pricing, we study the impacts of the creation of a new transportation infrastructure that connects two points (as planes or high-speed trains do) and coexists with an old infrastructure that continuously serves space (as roads do). Thus, two transportation modes compete: only road or road plus plane. We characterize the equilibria of a location and price game between two firms. Although airports are symmetrically located, asymmetric equilibria in locations emerge. When the airports are built, relocation of firms induce a decrease of total welfare, if the cost of the transport by plane is not small enough. Regional inequalities appear: in most cases, the welfare of one region decreases when that of the other increases. However consumers' surplus increases, and firms' profits decrease. Finally, we study the optimal location and pricing of the new infrastructure.

Keywords: Alternative transportation; Location choices; Asymmetric regional development; Hotelling analysis (search for similar items in EconPapers)
Date: 2000-03
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Citations: View citations in EconPapers (9)

Published in Regional Science and Urban Economics, 2000, 30 (2), pp.131 - 184. ⟨10.1016/S0166-0462(99)00041-1⟩

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Journal Article: Intermodal competition and regional inequalities (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01629768

DOI: 10.1016/S0166-0462(99)00041-1

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