Competition and Quality: Evidence from High-Speed Railways and Airlines


ShanghaiTech SEM Working Paper No. 2020-007

Hanming Fang

University of Pennsylvania, ShanghaiTech University and the NBER

 Long Wang

ShanghaiTech University

Yang Yang

The Chinese University of Hong Kong


The entry of High-Speed Railways (HSR) represents a disruptive competition to airlines, particularly for short- to medium-distance journeys. Utilizing a unique dataset that contains the details of all flights departing from Beijing to 113 domestic destinations in China since January 2009, we employ a difference-in-differences approach to examine the effects of HSR entry on the quality of service provided by airlines as proxied by their on-time performance, and to identify the channels through which competition leads to quality improvement. We document two main findings. First, the competition from the entry of HSR leads to significant reductions in the mean and variance of travel delays on the affected airline routes. Second, the reductions in departure delays-which are controlled mostly by airlines, and the duration of taxi-in time-which are controlled mostly by destination airports, are identified as the main sources of the improvement in the airlines' on-time performance.

Keywords: Competition; Service Quality; Transportation; Airlines; High-speed Rail; On-time Performance

Date Written: June 28, 2020

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