Pricing strategies: who leads and who follows in the air and rail passenger markets in Italy

In this paper, we aim at empirically uncovering the existence of price leadership in the passenger transport market, whose oligopolistic structure facilitates the strategic interaction among companies, with price being one of the principal elements of competition. The strategic interaction is partic...

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Bibliographic Details
Published in:Applied economics 2018-10, Vol.50 (46), p.4937-4953
Main Authors: Bergantino, Angela S., Capozza, Claudia, Capurso, Mauro
Format: Article
Language:English
Subjects:
Air transportation industry
airlines
Competitors
Economic analysis
Economic models
Economic theory
Game theory
Leadership
Markets
Operators
passenger transport
price leadership
Prices
Pricing policies
rail
Railroad transportation
Strategic interaction
Transportation
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Summary:In this paper, we aim at empirically uncovering the existence of price leadership in the passenger transport market, whose oligopolistic structure facilitates the strategic interaction among companies, with price being one of the principal elements of competition. The strategic interaction is particularly favoured by the fact that prices are easily observable online by all competitors. The analysis focuses on selected Italian city-pair markets that differ from one another with respect to the degree of inter- and intra-modal competition and to the characteristics of the transport services provided. We exploit this heterogeneity to study transport operators' strategic interactions in different competitive environments. We find evidence of the existence of price leadership, even though results differ across city-pair markets. In particular, it emerges that the incumbent operator, in either the air or the rail sector, always holds the role of leader.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2018.1459039