Market Structure and Partnership Levels in Air-Rail Cooperation

30 Pages Posted: 6 May 2016

See all articles by Changmin Jiang

Changmin Jiang

University of Manitoba - Asper School of Business

Tiziana D'Alfonso

Sapienza University of Rome - Department of Computer, Control, and Management Engineering (DIAG)

Yulai Wan

Hong Kong Polytechnic University - Department of Logistics and Maritime Studies

Date Written: December 2015

Abstract

In this paper, we build a theoretical model to study the underlying factors behind the various partnership levels in different cooperation schemes between airline and high-speed rail (HSR). We study two different intermodal relationships: a parallel one where the networks of the airline and the rail operator overlap partially and a vertical one where they do not overlap at all. We examine the situations when the cooperation levels are either exogenous or endogenous. For any given cooperation level, we show that the incremental profit of a vertical partnership is higher than that of a parallel partnership. However, when the two types of partnerships are both possible, the parallel partnership might be dominated by the vertical partnership only when the air-rail connecting service is sufficiently inferior to the connecting flight. The social welfare level of a parallel partnership is higher than that of a vertical partnership when the air-rail connecting service is sufficiently superior to the connecting flight. When the cooperation level is also a decision variable, a parallel partnership will have higher cooperation level than a vertical partnership when the travel time of HSR is sufficiently short compared with that of air.

Keywords: Airline, High-Speed Rail, Cooperation, Parallel Partnership, Vertical Partnership

Suggested Citation

Jiang, Changmin and D'Alfonso, Tiziana and Wan, Yulai, Market Structure and Partnership Levels in Air-Rail Cooperation (December 2015). Available at SSRN: https://ssrn.com/abstract=2774281 or http://dx.doi.org/10.2139/ssrn.2774281

Changmin Jiang (Contact Author)

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Tiziana D'Alfonso

Sapienza University of Rome - Department of Computer, Control, and Management Engineering (DIAG) ( email )

via Ariosto 25
Roma, 00185
Italy

Yulai Wan

Hong Kong Polytechnic University - Department of Logistics and Maritime Studies ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

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