ESTIMATION OF SWISS RAILWAY DEMAND WITH COMPUTATION OF ELASTICITIES

We adapt the 'Almost Ideal Demand System' (AIDS) from consumer expendi ture theory to estimate an equation explaining demand for rail passsen ger travel. The motivation far using an AIDS is essentially empirical: (1) The model is flexible enough to easily enable the insertion of sp ecific variables to take account of variation in the characteristics o f goods (examples cited include 'speed of transportation' and 'density of the railway network'); (2) the obtained equation ensures a good fi t to the data and compares favorably with other specifications. We der ive a demand function and formulas for the elasticities and other para meters. The model is applied to Swiss data, using a three-way error co mponents model on cross-section and time series data. We apply a linea r, simplified, version of the AIDS and we use an iterative approximati on of the true AIDS price index. Thanks to bootstrap replications, we simulate the distribution of the most relevant estimates of the elasti cities. (C) 1997 Elsevier Science Ltd.