The authors formulate and estimate a model of international air travel demand for Israel. Consumers’ wealth is found to be a significant determinant and failure to include it in the estimated equations yields price elasticities which are biased downward and income elasticities which are biased upward.
Topic: 16. Elasticity
This paper examines the pattern of a firm’s pricing rivalry and its associated price elasticities in a set of duopoly routes. The parameters of the marginal cost function are also estimated. This model allows for free variation of estimated “conduct parameters” and price elasticities across airline routes.
A Review of New Demand Elasticities with Special Reference to Short and Long Run Effects of Price Changes
A literature review suggests that increases in real fuel prices would lead to a short run reduction in both traffic and consumption, due to more careful driving and differential responses for different journeys. In the longer run the effects would be increased. It is suggested that non-dynamic estimation methods are biased, and that transport prices have wider effects, and are a more important lever of transport policy, than has sometimes been assumed.
The authors consider various concepts of demand elasticities, and several improvements in the methodology of transport demand studies are described. They also summarise the results for over sixty recent studies, and identify a number of problems along with suggested priorities for future research.
The authors develop a joint model for the demand for travel and the demand for travelcards. The estimates are that demand for underground travel is inelastic while the demand for bus travel is elastic. Simulation analysis attributes between one third and one half of the rise in demand for underground travel in the period 1982-87 to employment growth; and between one half and two thirds to the introduction of travelcards.
From his study of elasticities the author concludes that patronage of public transport in Spanish cities could be increased by adjustment of the proportionate charges for cash fares and multiple-ride tickets, and by increasing fares to provide higher frequencies.
Choice of functional form for the demand (forecasting) model is very important for empirical research. Of the five models examined, the translog demand system with theoretical constraints imposed upon the parameters performs the best. But further investigation is needed.
The authors analyse expenditure by visitors to Hawaii on six categories of goods, and estimate own and cross price elasticities of demand.
There are dangers in the use of some measures, but an approximate arc elasticity performs well.