“…Product di¤erentiation has been analyzed in several studies of the airline industry (e.g., Berry, 1990, Berry et al, 1996, Borenstein and Netz, 1999. However, these studies do not consider the way in which substitutable 1 The issue of mode substitution and its e¤ects has been discussed, for example by Bel (1997), González-Savignat (2004), Janic´(2003) and López-Pita and Robusté (2004). Some studies on choice of transport mode conclude that commuters mostly consider frequency of service (and more generally convenience of service) as one of the factors determining their elasticity (Voith, 1997 andAsensio, 2002); or the impact of urban transit projects (Baum-Snow and Kahn, 2000).…”