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Pricing in Overlapping Transport Networks

Achim I. Czerny, Peter-J. Jost and Benny Mantin

No 10-05, WHU Working Paper Series - Economics Group from WHU - Otto Beisheim School of Management

Abstract: This paper considers a transport network with two firms that operate a parallel service on a hub-to-hub connection and monopoly services on spoke-to-hub connections under increasing returns to scale. We find the following: A symmetric equilibrium cannot occur under independent (non-cooperative) pricing when the number of spoke-tospoke passengers becomes positive. The effect of cooperative pricing on mark-ups in spoke-to-hub, hub-to-hub and spoke-to-spoke markets (where double marginalization can occur) can be positive or negative. Cooperation can reduce total welfare though hub-to-hub markets are small.

Keywords: Pricing; transport networks; hub-and-spoke; double marginalization; complementarity; cooperation (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 L52 L91 (search for similar items in EconPapers)
Date: 2010-09
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