Railroad Costs and Competition: The Implications of Introducing Competition to Railroad Networks

John D. Bitzan

Journal of Transport Economics and Policy, 2003, vol. 37, issue 2, 201-225

Abstract: This study examines the cost implications of competition over existing US freight rail lines by testing for the condition of cost subadditivity. The study finds: (1) that there are economies associated with vertically integrated roadway maintenance and transport, suggesting that separating the two would result in increased resource costs; and (2) railroads are natural monopolies in providing transport services over their own network, suggesting that multiple-firm competition over such a network would result in increased resource costs. These findings suggest that policies introducing rail competition through "open access" or on bottleneck segments would not be beneficial from a cost perspective. Moreover, the price decreases necessary for the introduction of such competition to be beneficial would be large. © The London School of Economics and the University of Bath 2003

Date: 2003
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