Demand Shocks, Airline Pricing, and High-speed Rail


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Author: Feng Wei, Jihui Chen, and Lan Zhang

Abstracts: We study the high-speed rail (HSR) substitution forair travel through the demand shocks triggered by two events: the launch of Beijing–Shanghai high-speed railways (the ‘Jing-hu’ HSRs) and the Wenzhou train accident. Using a difference-in-difference approach, we find that, compared to those in the control group, mean airfares for routes along the Jing-hu HSRs decline by 30.6 per cent upon the launch, but rebound by 27.6 per cent following the accident. Furthermore, the two events have a larger impact on low-cost carriers and regional airlines, on tourism routes, and on flights that depart during evening hours than their counterparts.

Source Publication: Journal of Transport Economics and Policy, Volume 51, Part 4, October 2017, pp. 1–24