Price competition within and between airlines and high-speed trains: the case of the Milan-Rome route

Abstract

In the travel industry high-speed trains and airlines are increasingly competing for passengers, and the diffusion of price optimization based on real time demand fluctuations poses new challenges in the analysis of price competition between operators. This paper presents an analysis of how different competitors simultaneously adjust their prices in the short run. The empirical model accounts for dynamic price variations, exploring both intramodal and intermodal price competition. The results, based on 12,506 price observations, show that intermodal competition presents some kind of asymmetric behaviour, with airlines reacting more than trains to competitors' price changes. The paper concludes with the implications of this heterogeneous behaviour for the tourism and travel industries.