Competition in Multi-Modal Transport Networks: A Dynamic Approach

Tinbergen Institute Discussion Paper 12-116/VIII

21 Pages Posted: 2 Nov 2012

See all articles by Adriaan van der Weijde

Adriaan van der Weijde

Vrije Universiteit Amsterdam, School of Business and Economics

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics; Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Vincent A.C. van den Berg

VU University Amsterdam; Tinbergen Institute

Date Written: October 31, 2012

Abstract

We analyse the behaviour of market participants in a multi-modal commuter network where roads are not priced, but public transport has a usage fee, which is set while taking the effects on the roads into account. In particular, we analyse the difference between markets with a monopolistic public transport operator, which operates all public transport links, and markets in which separate operators own each public transport link. To do so, we consider a simple transport network consisting of two serial segments and two parallel congestible modes of transport. We obtain a reduced form of the public transport operator's optimal fare setting problem and show that, even if the total travel demand is inelastic, serial Bertrand-Nash competition on the public transport links leads to different fares than a serial monopoly; a result not observed in a static model. This results from the fact that trip timing decisions, and therefore the generalized prices of all commuters, are influenced by all fares in the network. We then use numerical simulations to show that, contrary to the results obtained in classic studies on vertical competition, monopolistic fares are not always higher than duopolistic fares; the opposite can also occur. We also explore how different parameters influence the price differential, and how this affects welfare.

Keywords: Public transport, congestion, market structure, market design

JEL Classification: L10, L92, R41, R48

Suggested Citation

van der Weijde, Adriaan and Verhoef, Erik T. and van den Berg, Vincent A.C., Competition in Multi-Modal Transport Networks: A Dynamic Approach (October 31, 2012). Tinbergen Institute Discussion Paper 12-116/VIII, Available at SSRN: https://ssrn.com/abstract=2169964 or http://dx.doi.org/10.2139/ssrn.2169964

Adriaan Van der Weijde (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Erik T. Verhoef

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 020 4446094 (Phone)
+31 020 4446004 (Fax)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Vincent A.C. van den Berg

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

HOME PAGE: http://www.feweb.vu.nl/nl/afdelingen-en-instituten/spatial-economics/staff/v-berg/index.asp

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
33
Abstract Views
515
PlumX Metrics