Scheduled service versus personal transportation: the role of distance

Identifier:  PC:2326

Handle: https://hdl.handle.net/20.500.11797/PC2326

Authors:  Flores-Fillol, Ricardo; Fageda, Xavier; Bilotkach, Volodymyr

Abstract:
This paper analyzes both theoretically and empirically the relationship between distance and frequency of scheduled transportation services. We study the interaction between a monopoly firm providing high-speed scheduled service and personal trans- portation (i.e., car). Most interestingly, the carrier chooses to increase frequency of service on longer routes when competing with personal transportation because provid- ing a higher frequency (at extra cost) it can also charge higher fares that can boost its profits. However, when driving is not a relevant option, frequency of service de- creases for longer flights consistently with prior studies. An empirical application of our analysis to the European airline industry con?rms the predictions of our theoretical model.