Own and cross-price elasticities of demand for domestic flights and intercity trains in the U.S.

In 2009, the U.S. Federal Government announced its plan to invest in the expansion of the passenger rail system, instead of adding to the freeway or aviation systems. On the other hand, environmental studies show that passenger rails have a lower polluting impact than flights or cars. In order to evaluate whether consumers would switch from flights to trains and use the new rail system, this paper estimates the own and cross-price elasticities of demand for domestic flights and passenger trains using the methodology described in Berry (1994). Specifically, the changes in demand for domestic flights and trains with respect to their prices are evaluated. The static model in this study suggests that the substitutability between these two modes of transport is minimal, in other words, travelers will to change their choices is very small given the configuration of the transportation system when the notice was made. In particular, train trips are substituted more easily.