Competition Effects in a Liberalized Railway Market

Markus Lang, Marc Laperrouza () and Matthias Finger
Additional contact information
Marc Laperrouza: Management of Network Industries, Swiss Federal Institute of Technology Lausanne (EPFL)

No 131, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: This paper presents a game-theoretic model of a liberalized railway market, in which train operation and ownership of infrastructure are vertically separated. We analyze how the regulatory agency will optimally set the charges that operators have to pay to the infrastructure manager for access to the tracks and how these charges change with increased competition in the railway market. Our analysis shows that an increased number of competitors in the freight and/or passenger segment reduces prices per kilometer and increases total output in train kilometers. The regulatory agency reacts to more competition with a reduction in access charges in the corresponding segment. Consumers benefit through lower prices, while individual profits of each operator decrease through a higher number of competitors. We further show that the welfare effect of increased competition in the freight and/or passenger segment is ambiguous and depends on the level of competition. Finally, social welfare is higher under two-part tariffs than under one-part tariffs if raising public funds is costly to society.

Keywords: Access charges; optimal pricing; railways; regulation; vertical integration (search for similar items in EconPapers)
JEL-codes: D40 L22 L51 L92 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-09, Revised 2011-04
New Economics Papers: this item is included in nep-com, nep-ene, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/131_ISU_full.pdf (application/pdf)

Related works:
Journal Article: Competition Effects in a Liberalized Railway Market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:iso:wpaper:0131

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