Three Essays in Transportation Economics

This dissertation revolves around understanding the determination of transportation networks and service quality, as well as quantifying the impact of these decisions on social welfare. The first chapter, “Subway Capitalization in Beijing: Theory and Evidence on the Variation of the Subway Proximity Premium”, discusses the heterogeneity of the urban transit capitalization effect and its policy implications. This chapter analyzes the relationship between community attributes and the subway home-price capitalization effect, asking whether the magnitude of the subway proximity premium is affected by neighborhood economic status and location. Using longitudinal data from Beijing, the chapter empirically estimates that decreasing a community’s distance to a subway station by 10% increases the housing price per square meter by 0.2%-0.9%. The chapter also shows that, subway capitalization effect is around 0.1%-0.2% lower for communities that charge a 1 Yuan higher property management fee. Moreover, the analysis also reveals that the subway capitalization will decrease by around 0.08% as a community’s distance to the CBD increases by 1 km. The second chapter, “1-Hub, 2-Hub or Fully Connected Network? A Theoretical Analysis of the Optimality of Airline Network Structure”, focuses on the determination of airline network structure, and provides a simple justification for the existence of the multi-hub networks. This chapter sets up a formal model to explore the optimality of multi-hub networks, with or without competition. It is shown that a single-hub or a fully connected network may not be the optimal network configuration, while a 2-hub configuration may be favored under certain circumstances. In addition, the chapter shows that competition can also affect an airline’s optimal choice of network: a 2-hub network can be preferable if a competitor enters the market. The third chapter “Service Competition in the Airline Industry: Schedule Robustness and Market Structure” investigates the relationship between airline’s schedule robustness (how well can a schedule cope with a delay to a particular aircraft) and market structure. Recognizing that schedule robustness is an important factor affecting the flight on-time performance, the chapter shows that there exists service quality competition in the airline industry, as carriers adopt more robust flight schedules when competition heats up. Such results shed light on the debate on the magnitude of airport congestion tolls, and have great public policy implications