Competition and Quality:Evidence from High-Speed Railways and Airlines

54 Pages Posted: 30 Jun 2020

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management

Zoe Yang

The Chinese University of Hong Kong - CUHK Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 28, 2020

Abstract

The entry of High-Speed Railways (HSR) represents a disruptive competition to air-lines, particularly for short- to medium-distance journeys. Utilizing a unique dataset that contains the details of all flights departing from Beijing to 113 domestic destinations in China since January 2009, we employ a difference-in-differences approach to examine the effects of HSR entry on the quality of service provided by airlines as proxied by their on-time performance, and to identify the channels through which competition leads to quality improvement. We document two main findings. First, the competition from the entry of HSR leads to significant reductions in the mean and variance of travel delays on the affected airline routes. Second, the reductions in departure delays-which are controlled mostly by airlines, and the duration of taxi-in time-which are controlled mostly by destination airports, are identified as the main sources of the improvement in the airlines' on-time performance.

Keywords: Competition; Service Quality; Transportation; Airlines; High-speed Rail; On-time Performance

JEL Classification: D40, O4, R4, L93, L1

Suggested Citation

Fang, Hanming and Wang, Long and Yang, Yang, Competition and Quality:Evidence from High-Speed Railways and Airlines (June 28, 2020). ShanghaiTech SEM Working Paper No. 2020-007, Available at SSRN: https://ssrn.com/abstract=3637295 or http://dx.doi.org/10.2139/ssrn.3637295

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Long Wang

ShanghaiTech University - School of Entrepreneurship and Management ( email )

100 Haike Rd
Pudong Xinqu, Shanghai
China

Yang Yang

The Chinese University of Hong Kong - CUHK Business School ( email )

7/F, Cheng Yu Tung Building
12 Chak Cheung Street, Hong Kong
Hong Kong
Hong Kong

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