Abstract
We study cooperation between the airline and high-speed rail (HSR) sectors by formulating their joint profit as a maximization problem using a multinomial logit choice model in a three-node setting. We allow the non-purchase option as an outside option available to consumers. The demand for each choice is not only a function of the price but also the service quality, such as the total trip time, frequency of service, and ease of connecting from the hub to a nearby HSR station. As a result, the following findings are presented. First, regardless of the service quality of either sector and the non-purchase option, cooperation decreases the total volume of the domestic market of a country. Second, when the attractiveness of the outside option is high, the HSR and air sectors can prevent a large reduction in the total volume by cooperation in the connecting market. However, this is not the case in the domestic market. Third, if the non-purchase quality in the domestic market is high, then cooperation increases the social welfare of the whole market. If the non-purchase quality is low, then cooperation increases the welfare of the whole market only in cases where the number of potential customers in the connecting market is relatively large. We also show the effect of improving air–rail service quality on each market share and on the total profit.
Highlights
High-speed rail (HSR) has been one of most efficient ways to travel between an origin and destination which are less than 1000 km apart, or when the travel time is less than 1.5 h [1,2,3]
We study cooperation between the airline and high-speed rail (HSR) sectors by formulating their joint profit as a maximization problem using a multinomial logit choice model in a three-node setting
With most airports located outside of city centers, the integration of HSR with local train networks can further enhance the benefits associated with HSR–airline cooperation
Summary
High-speed rail (HSR) has been one of most efficient ways to travel between an origin and destination which are less than 1000 km apart, or when the travel time is less than 1.5 h [1,2,3]. There are some differences with our model They assume that (1) the air transport and HSR are vertically differentiated, (2) the demand function is a function of both fares and the total travel time, (3) there are two airlines operating in the international market, and (4) the hub airport capacity is constrained. The present paper does not consider competition in the international market and capacity constraint These are important issues in practice, we focus on the analysis of the effect of service quality and the non-purchase option on the transport operator’s profits, consumer surplus, and social welfare.
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