DP5004 Intermodal and Intramodal Competition in Passenger Rail Transport

Author(s): Marc Ivaldi, Catherine Vibes
Publication Date: April 2005
Keyword(s): product differentiation, relevant transport market, simulation model
JEL(s): C35, C81, L11, L13, L92, L93, L98
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5004

The objective of the paper is to elaborate a simulation model to analyse inter and intra-modal competition in the transport industry, based on game theory models. In our setting, consumers choose a transport mode and an operator to travel on a given city-pair; operators strategically decide on prices for the types of service they provide. We derive the market equilibrium and simulate potential scenarios. In particular we measure the impact of entry by a low cost train operator and the effect of a kerosene tax. Hence our framework could serve as a tool to measure the effectiveness of competition on a relevant market or to design marketing strategies. More generally it can be applied in cases of oligopolistic competition when detailed data are not available.