Effects of High-speed Rail’s Competition Strategies on Price and Share in the Transportation Market

Abstract

While a variety of papers consider only the competition between the two transportation means: aviation and high-speed rail (HSR), we analyze the effects of competition between the three parties by distinguishing aviation from full-service carrier (FSC) and low-cost carrier (LCC). This paper investigates the effect of the high-speed rail‘s competition strategies (weight of welfare, rail speed and access time to transport terminals) on the equilibrium ticket price and market shares of each transportation mode with the use of an adapted Circular city model. The results show how the price and market share changes depending on the variation of the three variables. We further suggest implications from the perspective of each competitor based on the results. Finally, an empirical study on Korea’s transportation markets is conducted to verify the proposed model and analyze the market situation.