Relationships between fares, trip length and market competition
economics - appraisal/evaluation, economics - operating costs, economics - value of time, organisation - competition, place - europe, policy - fares
Optimal fares, Trip length, Competitive situation
This paper analyses equilibrium fares that arise from Collusion, Cournot, Stackelberg, Bertrand and Sequential Price Competition when two profit maximising transport firms produce symmetrically differentiable services and have identical costs. Special focus is placed on how different equilibrium fares are linked to trip length. Higher operator costs and higher demand from the authorities regarding the quality of transport supply result in steeper relationships (larger rate of change) between all fares and travel distance. Also, a higher degree of substitutability between the services will in most cases make these relationships steeper. The competitive situation has less influence on fares, both absolutely and relatively, the longer routes the operators compete on.
Permission to publish the abstract has been given by Elsevier, copyright remains with them.
Clark, D.J., Jørgensen, F., & Mathisen, T.A. (2011). Relationships between fares, trip length and market competition. Transportation Research Part A: Policy and Practice, Vol. 45, (7), pp. 611-624.