Economies Of Traffic Density Research Articles

How do pandemics affect intercity air travel? Implications for traffic and environment

This paper investigates how a pandemic affects the distribution of traffic between public and private transport and the emissions from the transport sector. By assuming that there exists higher health risk of traveling in public transport than in private transport and using air transport and private cars as examples, we find the following results. First, the effects of a pandemic on the traffic volumes of airline services and private cars depend crucially on, for instance, the willingness-to-pay of travelers, the degree of substitution between transport modes, the demand-side network effect (via schedule delays), and the supply-side network effect (via the economies of traffic density). In particular, heterogeneous effects of the pandemic on the traffic volumes and flight frequencies of different airline services are found. Second, the total transport-related CO2 emissions decrease after the pandemic if the CO2 emissions per air traveler (or per flight) are sufficiently high, or the degree of substitution between airline services and private cars is sufficiently low. Third, numerical examples on the change in price of car travel and the introduction of high-speed rail show consistent insights. Finally, several policy implications are discussed.

High-speed rail networks, capacity investments and social welfare

Abstract In this paper, we analytically study the performance of two topologies of high-speed rail (HSR) networks: isolated-corridors and grid networks. We evaluate how HSR configuration affects capacity of newly developed infrastructure, profits and social welfare by considering a number of factors, namely economies of traffic density, market size, operating cost and cost of capital. Our investigations focus on a social welfare-maximizing entity which provides HSR train services as well as develops infrastructure. We find that although the grid network allows for more new markets, the isolated-corridors network may perform better in terms of social welfare when the cost of capital is high, the demand in the new markets established by the isolated-corridors network is high, the operating cost (excluding density effect) is high and the traffic density effect is weak. We also identify cases where the optimal network configuration in terms of social welfare may not be optimal in other aspects, such as capacity, consumer surplus and profits. For example, when the density effect is strong, grid network is likely to be socially optimal, but it faces more difficulty in recovering the invest cost comparing with the alterative network.

Market power and its determinants in the Chinese railway industry

This study measures the degree of market power of China’s railway operator and analyzes its determining factors. A newly-developed stochastic frontier method is used to estimate the Lerner indexes of the operator’s 18 regional railway bureaus from 1995 to 2014. Regressions are then conducted on these indexes to identify the determining factors of market power in this industry and explain any regional heterogeneity. We find that China’s railway operator exercises significant market power with an overall positive Lerner index. Furthermore, obvious regional heterogeneity in market power exists among the railway bureaus. Railway bureaus in Eastern China typically have the highest Lerner index scores, owing probably to greater regional rail demand and/or the economies of traffic density in rail operation. We find that China’s dramatic high-speed rail development in recent years appears to have no effect on the overall market power of the rail operator. On the other hand, railway market deregulation, especially a series of price liberalizations in recent years, may provide railway bureaus with more autonomy to exert their market power, widening observed heterogeneity.

Hybrid cooperation agreements in networks: The case of the airline industry

This paper develops a unified framework to analyze a continuum of hybrid cooperation agreements along two dimensions: their degree of revenue sharing (scope of alliances) and their degree of cost sharing (scope of joint ventures). The analysis focuses on the air transportation industry, distinguishing between interline and interhub markets. As economies of traffic density become stronger, we find that the socially optimal cooperation agreement moves from full alliance to joint venture in interline markets, whereas it moves from joint ventureto merger in interhub markets. These results are driven by the tradeoff between a procompetitive effect of alliances in interline markets and an anticompetitive effect in interhub markets, along with the efficiency gains associated with joint ventures in interhub markets. We also develop an empirical application for intercontinental routes for the period 2010–2016 that identifies a positive impact of deeper degrees of airline cooperation (revenue and cost sharing) on traffic, both in interline and interhub markets. Therefore, the potential anticompetitive effect of deeper alliances in interhub markets is not observed in our sample.

Effects of high-speed rail and airline cooperation under hub airport capacity constraint

This paper analyzes the effects of cooperation between a hub-and-spoke airline and a high-speed rail (HSR) operator when the hub airport may be capacity-constrained. We find that such cooperation reduces traffic in markets where prior modal competition occurs, but may increase traffic in other markets of the network. The cooperation improves welfare, independent of whether or not the hub capacity is constrained, as long as the modal substitutability in the overlapping markets is low. However, if the modal substitutability is high, then hub capacity plays an important role in assessing the welfare impact: If the hub airports are significantly capacity-constrained, the cooperation improves welfare; otherwise, it is likely welfare reducing. Through simulations we further study the welfare effects of modal asymmetries in the demands and costs, heterogeneous passenger types, and economies of traffic density. Our analysis shows that the economies of traffic density alone cannot justify airline–HSR cooperation.

Economies of Traffic Density in Japanese Domestic Aviation Market

Economies of Traffic Density in Japanese Domestic Aviation Market

Intermodal alliance and rivalry of transport chains: The air cargo market

This paper examines the effect of multimodal integration on the rivalry between two transport chains – a forwarder–airline alliance and an integrator – under the economies of traffic density. An improvement in multimodal integration by a forwarder–airline alliance would increase the alliance’s output, while reducing the integrator’s output, not only in the multimodal market but also in other markets of the cargo network. It would further increase the alliance’s profit, provided the intermodal improvement is not too costly, while reducing the integrator’s profit, and would likely improve both consumer surplus and total surplus. We also find that an alliance in general leads to greater market shares for the firms involved than outsourcing.

Complementary versus semi-complementary airline partnerships

As low-cost airlines or carriers excluded from international markets by regulation may seek to expand internationally in an indirect way through code-sharing agreements, they can choose partner airlines from among domestic or international carriers. The former case results in a semi-complementary partnership, while in the latter a classic complementary alliance is formed. This paper compares welfare properties of the two types of partnerships under economies of traffic density. Semi-complementary partnerships yield higher total welfare (but not necessarily lower prices) when economies of traffic density are strong, demand is more price-sensitive, or where a carrier feeding domestic traffic to international routes is a lower cost one.

Complementary vs Semi-Complementary Airline Partnerships

As low-cost airlines or carriers excluded from international markets by regulation may seek to expand internationally in an indirect way through code-sharing agreements, they can choose partner airlines from among domestic or international carriers. The former case results in a semi-complementary partnership, while in the latter a classic complementary alliance is formed. This paper compares welfare properties of the two types of partnerships under economies of traffic density. Semi-complementary partnerships yield higher total welfare (but not necessarily lower prices) when economies of traffic density are strong, demand is more price-sensitive, or where a carrier feeding domestic traffic to international routes is a lower-cost one.