Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87523
Authors: 
van der Weijde, Adriaan Hendrik
Verhoef, Erik T.
van den Berg, Vincent A. C.
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper 12-119/VIII
Abstract: 
We formulate a horizontal differentiation model with price-sensitive demand and asymmetric transport costs, in the context of transport scheduling. Two competitors choose fares and departure times in a fixed time interval. Consumers are distributed uniformly along the interval; their location indicates their desired departure time. In a standard Hotelling model, locations are chosen before prices. In our context, the opposite order is also conceivable, but we show that it does not result in a Nash equilibrium; the same is true for a game in both variables are chosen simultaneously. We also discuss Stackelberg game structures and second-best regulation. We conclude that the addition of price-sensitive demand results in equilibria in the traditional Hotelling model with price setting; there, services are scheduled closer together than optimal. We also show that it is possible to include asymmetric schedule delay functions. Our results show that departure times can be strategic instruments. Optimal regulatory strategies depend on the value of schedule delay, and on whether the regulator can commit.
Subjects: 
horizontal differentiation
scheduling
transport
JEL: 
L11
L51
L91
R40
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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