Effects Of Introducing Intramodal Competition To High-Speed Rail On HSR-Air Competition

Introducing competition in railway is trending for railway reform worldwide.Both economic theories and real cases from Europe have shown that introducing competition can improve the efficiency of railway operation.In China,the introduction of competition has become one of important concerns of China’s railway reform,which gives rise to a series of questions for why and how of introducing competition in HSR.Concerning the fact of ambitious constrction of HSR in China since 2008,this work focuses on the frontier of railway industry-the introduction of competition to explore,testing and predicting the effects of introducing competition in high-speed railway on the HSR-Air competition market.So far,there are less academic evidence answering to the question of what would be the economic effects of introducing intramodal competition in railway.Also,there are less works studied the effects of HSR intramodal competition on HSR-Air competition.The implications are providing evidences for policy makers to design the plan of introducing new HSR entrant,and helping the HSR and Air operators as well as HSR infrastructure manager reach their optimal decision when the entrant is introduced.The major contents are as follows:(1)Case study of Italo from Italy and Ouigo from FranceThis chapter studies the case of introducing competition in HSR from Europe-Italo from Italy and Ouigo from France.By summarizing the effects and benefits of introducing competition in HSR as well as the factors affect them,it is found that the introduction of competition could improve the competitiveness and efficiency of the railway industry,and reduce the cost of the industry.(2)Theoretical analysis of the effects of introducing intramodal competition on HSR-Air competitionThis chapter starts with the analysis of the classical economic theories,studying the path and key influencing factors that affect the competition between HSR and air transport.Then it builds the economic analysis framework of the HSR-Air competition under the condition of new HSR entrant,which helps to the preparation and explanation for the quantitative analysis of the following content.(3)The effects of introducing new entrant with horizontal differentiation on HSR-Air competitionThis chapter refers to the world’s first private-owned HSR Italo.Considering horizontal differentiation,the author proposes both linear and circular city model to study the optimal pricing before and after the introduction of the new entrant.After that,this chapter applies the model to the Milan-Rome route.The results show that in a fully covered market,the introduction of competition could help HSR compete with airline.On the other hand,due to the tickets prices dropped,the consumer surplus and social welfare are significantly improved,but the total profit of railway industry is decreased.Further sensitivity analysis shows that if the high-speed rail and airline incumbents are close competitors,then in this case,the introduction of competition could increase the total profit of the railway.(4)The effects of introducing new entrant with vertical differentiation on HSR-Air competitionThis chapter explores the effects of introducing low-cost high-speed rail(LCR)as an answer to the railway reform on HSR-Air competition.In particular,taking Ouigo as an example,by proposing a vertically differentiated model,this chapter first derives the optimal pricing decisions for low-cost high-speed rail,full-service high-speed rail(FSR)and air transport(Air).It is proved analytically that introducing LCR leads to reduced FSR and Air fares as well as to reduced Air traffic.Moreover,all the effects are stronger for an independently operated LCR.Then the model is applied to the Paris-Marseille route,based on data collected from publicly available sources.It is found that introducing competition leads to less air traffic and FSR traffic,but more rail traffic in total.Furthermore,this comes with increases of combined railway profit and total social welfare.(5)The effects of access charging on introducing new entrant and HSR-Air competitionBy incorporating the pricing decision of HSR infrastructure manager into the HSRAir competition model,and taking the Beijing-Shanghai route as an example,this chapter studies the effects of access charging on introducing competition.The numerical results show that the introduction of competition will decrease the rail access charge,forcing the aviation operators between Beijing and Shanghai to withdraw from the market.The unit revenue of high-speed railway will decline significantly due to the severe fare competition brought by the new entrant,but the profit of the railway industry(operators and infrastructure manager)could be improved or basically unchanged.In addition,the introduction of competition significantly improves the consumer surplus and social welfare.As a result,in the Beijing-Shanghai market,the railway industry and consumers could achieve a win-win situation leaded by the new entrant.The main innovations are: 1)Combining intramodal and intermodal competition in the same theoretical analysis framework,providing references for comprehensive regulation.2)Modeling the optimal pricing decisions for HSR operators,airline and HSR infrastructure manager considering globle railway libelization,taking the market conditions,incumbent-owned and privately-owned HSR entrants,policy tendency for HSR infrastructure manager into account when modeling,which helps to decision making and regulation desigining under various situatiion.3)Giving the quantitive results of the introduction of HSR entrant by using data from real case,providing evidences and confidence for authorities to carry out the plan for introducing intramodal competition in HSR,promoting the railway reform.4)Inspired by international experiences,proposing incumbent-owned low-cost HSR as a beneficial way of introducing on-track competition in China,which provides a new approach to improve the efficiency of resources allocation of HSR for China.