This paper estimates the effect of international airline alliances on the volume of passengers connecting from domestic to international flights. Using data on Japanese domestic air services, the analysis focuses on the initial wave of alliance expansion by Japan’s major carriers between 1995 and 2005. The identification strategy compares changes in passenger volumes between airlines that expanded their alliance participation and those that did not, and further contrasts passengers connecting from domestic to international flights (type I) with those traveling solely on domestic flights (type D) on the same domestic segments. The results indicate that alliance expansion significantly increased the number of type I passengers.
This paper studies how vertical integration, subsidies, and interoperability regulation shape investment and welfare in electric vehicle (EV) public charging markets. We model the interaction between Charging Point Operators (CPOs), which invest in charging infrastructure, and Mobility Service Providers (MSPs), which sell charging services to end users. The model features indirect network externalities: denser infrastructure reduces range anxiety and increases EV adoption, while higher EV demand raises infrastructure profitability. In the benchmark laissez-faire environment, vertical integration creates a trade-off. Integrated CPOs-MSPs may foreclose rival MSPs and reduce downstream competition, but they also internalize the complementarity between infrastructure investment and EV demand, generating higher infrastructure density, EV adoption, consumer surplus, and welfare than vertical separation. This welfare ranking is established under foreclosure and is then generalized in a robustness extension with interoperability constraints. Minimum-margin rules keep the rival MSP active and soften foreclosure, while the integrated firm still retains part of its investment advantage. However, when interoperability entails compliance and coordination costs, stricter access regulation may further weaken infrastructure investment incentives. We also compare consumer subsidies and firm subsidies within the benchmark environment. Consumer subsidy dominates under vertical integration, while firm subsidy may dominate under separation only when network effects are sufficiently strong. A calibration to Italian metropolitan areas supports these mechanisms and highlights a fiscal trade-off: consumer subsidy generates larger welfare gains, whereas firm subsidy may deliver higher environmental benefits per euro spent.
This paper explores beneficial network spillovers resulting from airline-alliance extensions like those that occur when a US carrier adds new foreign partners to its existing international alliance. In the model, a US carrier and an existing foreign alliance partner initially cooperate in providing service between an interior US domestic endpoint and a foreign destination via an international US gateway. Then, a second foreign carrier, which previously provided traditional interline service to a different foreign endpoint via the same gateway, also becomes an alliance partner of the US carrier. Since trips to the two foreign destinations from the interior US endpoint share the same domestic route to the gateway, cost complementarity between the two international markets exists under economies of density. As a result, the alliance extension, by reducing the fare and raising traffic to the new foreign endpoint (which flows on the domestic segment), leads to a lower cost for alliance service to the original foreign endpoint, further reducing the fare in this market, which was already low due to the presence of the initial alliance. The paper analyzes this beneficial spillover along with others using a simple model.
Against the backdrop of maritime decarbonization, this paper develops a regional competition model with two heterogeneous ports, where a large port undertakes emission-reduction investment and a smaller port benefit from partial technology spillovers. We compare equilibrium outcomes under pure competition and cooperative mechanisms. Under competition, the large port invests in abatement only when market size and scale advantage exceed threshold levels relative to competition intensity. Insufficient demand or excessive competition erodes margins and weakens green investment incentives. Introducing cooperation with technology sharing and profit redistribution generates a non-monotonic effect. When spillovers are limited or competition is intense, cooperation may dampen investment incentives. However, under moderate competition and sufficiently strong technology sharing, cooperation can simultaneously enhance emission reduction and profitability, yielding a conditional double dividend.
We estimate the income and fuel price elasticities of household vehicle kilometres travelled (VKT) and car ownership. To model the VKT, we apply a discrete-continuous model on registrAy micro panel data, covering all Swedish households from 1999 to 2018. We model two joint choices: car ownership and VKT conditional on car ownership, where the elasticity of VKT from these two choices are obtained by using the Two-Part model. We account for unobserved household effects using a correlated random effects specification and take household adjustments into account by including lagged values of fuel prices and income. Our preferred model yields a long-run income elasticity of 0.45 for private VKT, where close to two-thirds of the effect comes from the income elasticity of car ownership. The long-run fuel price elasticity of private VKT is-1.03, with the response in VKT among car owners being larger than the response in car ownership.
Motivated by the forthcoming terminations of most highways concessions in France, we propose a versatile model of dynamic regulation and contract renewals that describes a long-term relationship between the public authority and an incumbent operator with private information about its costs that may face potential entrants. We discuss various issues including the nature of discriminatory biases towards entrants, their consequences on investments, the public or private nature of the management of concessions, the role of the operator’s financial constraints, the consequences of allotments. So doing, we isolate a few principles that should guide policy-makers when deciding upon concession renewals.
During the last decades, various studies have documented the impact of incentive regulation on the productive efficiency of network industries, being toll roads a notable exception. Using two-stage data envelopment analysis (DEA), we contrast the performance of two groups of Peruvian Public-Partnership Project (PPP) toll roads governed by distinct regulatory regimes, with different incentive powers and risks transferred to concessionaires. We find that during from 2016 to 2022, “pure toll” PPP projects achieved higher average efficiency scores than ‘hybrid toll-availability payment’ projects. As well, the calculation of Malmquist indices reveals the differentiated impacts of climatological and public health-related shocks on road productivity during the study period. Results also show that PPP projects with relatively strong incentives exhibited a greater average productivity growth than those characterized by low-powered incentive schemes. Additionally, the average profitability indicators of the first group of projects were higher than those of the second group.
Third-party logistics providers (3PLs) play a vital role in freight transportation supply chains (SC) and face intense competition to stay profitable. As a result, making well-informed decisions is crucial for their success. This study examines a 3PL that operates a railway fleet alongside competing 3PLs that rely on road transportation. While all 3PLs compete to secure cargo, those using road transport also face the challenge of attracting drivers amidst ongoing driver shortages. To address this, a risk-aversion model is developed for 3PLs. The study also considers a fuel refinery that supplies both biofuel and fossil fuel to meet the needs of road and rail transport. The refinery has the option to export surplus fuel to external markets at a premium price. Meanwhile, the government plays a key role by subsidizing biofuel supply and regulating greenhouse gas emissions from fuel production through penalties. A sustainable SC is achieved through a Nash equilibrium, with the government acting as the leader in a Stackelberg game framework. Prices and other decision variables are determined by optimizing each stakeholder's objective function, while the government's function is designed to ensure SC sustainability. Additionally, special emphasis is placed on promoting rail transport as an environmentally friendly alternative. The model's validity is demonstrated through a real-world case study and sensitivity analysis. Results indicate that government intervention supports SC sustainability by encouraging both rail transport and biofuel production, with biofuel optimized to account for 17.15 % of the total fuel supply on average. By implementing subsidies and improving logistics services, competition among 3PLs can drive higher rail fleet utilization, reaching up to 78 % of total fleet use.
The Flemish Region in Belgium reformed its registration tax for passenger cars and its annual road tax in 2012 and 2016 respectively, to reflect a car's CO2 emissions and Euro pollution class. Moreover, from 2019 to 2020, natural persons and the self-employed could obtain a premium for the purchase of a zero-emission car. Using a difference-in-differences analysis, we find that the reform of the registration tax has caused an accelerated decrease in the CO2 emission factors of new cars sold in Flanders, compared to other regions. This result holds for privately owned cars as well as company cars. However, the average treatment effect was rather small compared to the counterfactual. The additional effects of the reform of the annual road tax and the zero-emission car premium are even smaller than for the registration tax, and not significant in the case of private cars.
The value of travel time and reliability are significant economic parameters in canonical transport Cost-Benefit Analysis. Our study employs connected vehicle data paired with Sydney, Australia's, extensive toll road network to introduce a novel approach to valuing these metrics. Toll uptake makes the time-money trade-off explicit: travellers pay to avoid congestion. While toll choices have long been used to infer time valuation, a network-wide approach incorporating passive revealed preferences has not yet been explored. We design choice sets using methods termed route 'observation' and 'generation', and estimate time and reliability valuations using mixed-path size logit. Our findings align closely with official estimates used in project appraisal, and set the stage for panel revealed preference studies as connected vehicles occupy more of the vehicle fleet.
This paper considers European airline markets to establish a causal effect of competition on pricing dynamics. It shows that intertemporal price dispersion is strongly reduced by competition because flights booked close to departure time are priced substantially lower when competition increases. This way competition mainly benefits late bookers. Low-cost carrier competition appears to have a strong and lasting negative effect on intertemporal price dispersion. The effect of competition by full-service carriers is moderate and seems to disappear in the long run. This study confirms the crucial importance of low-cost carrier competition for European aviation markets.
We develop a three-stage game with three governments, a EU-US aircraft production duopoly, and competitive airlines. The model determines the optimal combination of fossil fuel taxes and fuel efficiency standards to decarbonize the aviation sector with imperfect competition and technological spillovers, under various government cooperation levels. We find that without international cooperation, technology spillovers prevent large efficiency investments. Fuel taxes are low but exceed domestic climate damages in regions without aircraft production. Regions with domestic aircraft producers subsidize aviation when the social cost of carbon is low. Second, EU-US cooperation increases fuel efficiency, but fuel taxes are lower than without cooperation, such that carbon emission reductions are limited both with and without cooperation. Third, global cooperation yields the largest efficiency gains, but fuel taxes remain below the world climate damage. Finally, achieving net-zero emissions requires a combination of fuel efficiency, demand reduction through higher fuel taxes, and new aviation fuels.
An economic viability of last-mile delivery via drones is assessed, offering an investment model comparing traditional motorcycle delivery to drone-based alternatives. Two drone investment options — purchase or lease (Drone-as-a-Service) — were introduced. The proposed last-mile delivery model considers capital and operational costs, calculating Net Present Value(NPV) and Return of Investment (ROI) per investment scenario. For the operational expenses, the energy consumption model for the motorcycle and the drone is formulated. Furthermore, three wind settings — low, medium, and high wind — were examined to account for environmental factors impacting drone performance. The investment model has been formulated and then validated considering the relevant literature as well as realistic information collected during a semi-structured interview with industry experts The findings affirm the financial feasibility of adopting drones for last-mile delivery. Drone-as-a-Service emerged as a more profitable choice, exhibiting improved NPV and ROI over owned drones or motorcycle delivery. Emphasizing DaaS in the investment model presents a probable scenario for the logistics industry, easing their transition to drone technology. Evidence of DaaS viability is of value since it could convince risk-averse distribution vendors to adopt drone delivery.
Air and maritime transport services enable mobility and economic and social development, but they have significant environmental impacts. To reduce carbon emissions, there is a growing trend towards adopting electric ships for short-distance passenger transport. Nonetheless, there is a lack of appropriate valuation frameworks. This paper proposes a framework specifically tailored for evaluating investments in electric ships, considering the economic, environmental, and social impacts. A real options approach balancing users' utility is used, with demand following a stochastic process and unexpected jumps. Using the Azores as an empirical case study, the results revealed that investing 25 million euros in electric ships yields a significantly positive impact on social welfare (1906 million euros). For long-distance travel, maritime transport's impact on social welfare is diminished, making it less suitable. Embracing electric ships can unlock new possibilities for enhancing social welfare and sustainability. The contribution of this paper lies in its unique approach, as very few frameworks enable the comprehensive social-environmental valuation of green investments.
We study the collusion between the regulator and the private sector in misreporting service quality in highway projects to obtain performance-based subsidies. The impact of collusion on government subsidies and tolls is analyzed using the principal-agent model, and a mechanism to prevent collusion is devised. The analysis explores the incentive effect of government subsidies on effort in the collusion case. A mechanism for preventing collusion was presented to induce the supervision department to report truthful service information, and the effectiveness of the mechanism was analyzed. These results indicate that collusion leads to subsidies that no longer motivate efforts to improve service quality. Specific subsidies and penalties were provided as collusion prevention mechanisms. The collusion prevention mechanism effectively alleviates the ineffectiveness of subsidies, encourages the private sector to increase its efforts, reduces tolls, and improves social welfare. Social welfare is maximized when collusion penalties are imposed entirely on the private sector.
We analyze consumer search and purchase behavior in response to airline revenue-management practices using data from a major carrier’s website and Google Flights. We first describe patterns in search timing, purchase decisions, and paid fares. Then we estimate a multinomial logistic regression to identify factors driving search timing, finding that single adults with loyalty status, especially booking one-way nonstop itineraries, tend to search closer to departure. Next, we use a binary logistic model of conversions of searches to sales, showing that competitors’ prices and changing customer composition explain rising conversion probabilities as departure nears. Finally, using a fixed-effects regression, we reveal how search and booking patterns affect prices paid. Late-arriving travelers, particularly single adults with loyalty status, pay substantially more, consistent with the airline’s pricing strategies that segment more inelastic customers. Overall, our findings underscore how revenue-management, competitor fares, and consumer characteristics jointly shape online search and purchase behavior.
In summer 2022, Germany allowed nationwide access to public transport for just 9 euros per month. In this paper, we examine the effects of this “9-Euro Ticket” and compare our results with other analyses that use different empirical approaches. The evidence shows that the ticket induced only a marginal shift from car to public transport and that it has primarily been used to expand mobility rather than to substitute car trips. We approximate the welfare effects of the policy by estimating the short-run marginal value of public funds to be around 1. Compared to other potential policies, this value is relatively low and indicates that alternative policies could achieve a higher welfare gain at comparable costs. Based on these results and in conjunction with evidence from similar programs and insights from economic theory, we propose and discuss the introduction of dynamic pricing for public transport as a welfare-enhancing alternative.
When faced with capacity constraints, firms may moderate demand by increasing prices when demand is known to be high ex-ante (i.e., systematic peak-load pricing). In this article, we examine the extent and duration of systematic peak-load pricing in the days surrounding public holidays in the U.S. airline industry. Applying two-stage least squares techniques to a unique panel of over 18 million fares, we estimate travel premiums ranging from 4.3% to 83.1% in the days surrounding national holidays and from 2.7% to 34.7% in the days surrounding federal holidays. We also find that the duration of the peak-travel period is longer for national holidays and shorter for federal holidays. Examining heterogeneity in holiday peak-load pricing, we find some evidence that travel premiums during national holidays are larger on longer-distance routes, on routes to or from slot-controlled airports, on routes to leisure destinations, and on ultra-low-cost carriers.
Using the Generalized Forecast Error Variance Decomposition (GFEVD) method, this study assesses the effects of oil price shocks on both the return and volatility of aviation stocks. Specifically, we examine how different types of oil supply shocks—such as those related to oil supply, economic activity, oil consumption demand, and oil inventory—impact airline returns and volatility. Our findings indicate that fluctuations in airline returns primarily stem from economic activity shocks. However, the volatility of airlines is influenced by a range of shocks. Lastly, we offer important policy implications tailored for airline managers, market investors, and policymakers to navigate this relationship effectively.
