Effects of Airline Entry on High-Speed Rail

This paper investigates how an incumbent high-speed rail (HSR) operator responds to the entry of an airline. We find that the entry reduces frequencies of HSR service, but it reduces the frequency of HSR service with a small number of stops more. Furthermore, measuring the train size by the number of passengers carried per trip, the airline entry reduces train size of HSR service with a large number of stops, but it does not significantly affect train size of HSR service with a small number of stops. Third, the airline entry improves social welfare in most cases. However, the distribution of such welfare gain is uneven among different markets. Finally, several policy implications are provided.