Intermodal competition with high speed rail-a game theory approach

It was estimated that approximately 50% of the air trips, 20% of rail trips, and 15% of freeway bus trips in Taiwan's western corridor would be replaced by Taiwan High Speed Rail (THSR) [5]. If the carriers of these trips are to compete with THSR, reducing flight frequency and allying airlines might be the most effective approaches. In this paper we calibrate the payoff functions of various modes with stated preference (SP) and revealed preference (RP) data and solve the new Nash Equilibrium by maximizing payoff functions with respect to fare rates and flight frequency after the operation of THSR. In the case study, we predict that allied airlines flying between Taipei and Kaohsiung would be difficult to remain profitable during the first quarter of THSR's operations, but the market share and the daily flight frequency will reduce by more than 50%.