Essays on economics of transport infrastructure : pricing, investment and competition

This dissertation focuses on three major topics in transportation. The first one is related to the seaports adaptation to climate change related disasters (Chapter 2). We investigate the disaster adaptation investments made by two landlord ports with each serving its captive markets while competing for a common hinterland. The impact of “Knightian uncertainty” of disaster occurrence on port adaptation investment is investigated. We also investigate the impacts of inter-port and intra-port competition and cooperation on the port adaptation investment. The second topic is related to competition between airlines and high-speed rail (HSR) (Chapter 3). We investigate, both theoretically and empirically, the effect of HSR speed on airline traffic and price, taking into account the degree of air-HSR service substitutability. We consider two countervailing effects of HSR speed on airlines, i.e., the “travel time” effect and the “safety” effect. A rare natural experiment in HSR speed reduction in China is used to empirically test the theoretical findings. The incident is a rare quasi-natural experiment of HSR speed change as it was forced by the government due to safety concern and implemented system-wide regardless of market heterogeneity. A difference-in-differences method is used for estimation of the HSR speed effect on airlines as well as for verification of the theoretical predictions. The last topic addresses two important issues in the air transport economics, aiming to provide new insights. In Chapter 4, we develop a structural discrete-choice model to study airline competition in Chinese domestic market, explicitly taking into account the potential effects of “legacy” regulation on airlines’ competition behavior. Finally, in Chapter 5, we explore the effect of airport congestion on airport’s concession revenue. We model and empirically test two countervailing effects of airport congestion on airport concession demand: namely a “dwell time” effect (passenger spends more, due to longer dwell time within the airport) and a “stress” effect (passenger spends less when he/she feels stressful because of the congestion). The implications on airport optimal pricing and social welfare are investigated.